Moreau Appraisals, Inc. can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is usually the standard. The lender's only liability is generally just the difference between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and typical value variations on the chance that a borrower defaults.
During the recent mortgage upturn that our country recently experienced, it was widespread to see lenders reducing down payments to 10, 5 or even 0 percent. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the market price of the house is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and on many occasions isn't even tax deductible. Instead of a piggyback loan where the lender consumes all the losses, PMI is lucrative for the lender because they acquire the money, and they are covered if the borrower is unable to pay.
How home owners can keep from paying PMIWith the passage of The Homeowners Protection Act of 1998, lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on most loans. Wise home owners can get off the hook beforehand. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
Considering it can take a significant number of years to get to the point where the principal is only 80% of the original amount borrowed, it's important to know how your California home has grown in value. After all, every bit of appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends forecast declining home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have acquired equity before things simmered down.
A certified, California licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Moreau Appraisals, Inc., we're masters at recognizing value trends in Orange County, Orange County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At that time, the homeowner can retain the savings from that point on.
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