Have equity in your home? Want a lower payment? An appraisal from Central Valley Home Appraisal can help you get rid of your PMI.When buying a house, a 20% down payment is typically the standard. The lender's liability is often only the difference between the home value and the balance remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and typical value variations in the event a borrower doesn't pay.
During the recent mortgage upturn that our country recently experienced, it became customary to see lenders only asking for down payments of 10, 5, 3 or sometimes 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional plan takes care of the lender in case a borrower doesn't pay on the loan and the market price of the property is less than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. Instead of a piggyback loan where the lender absorbs all the deficits, PMI is lucrative for the lender because they collect the money, and they receive payment if the borrower defaults.
How can a homebuyer refrain from bearing the expense of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on nearly all loans. Wise homeowners can get off the hook a little early. The law stipulates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Because it can take a significant number of years to get to the point where the principal is just 80% of the initial amount borrowed, it's necessary to know how your California home has increased in value. After all, all of the appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends predict lower overall home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have acquired equity before things cooled off.
The difficult thing for almost all people to determine is whether their home equity has exceeded the 20% point. An accredited, California licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At Central Valley Home Appraisal, we know when property values have risen or declined. We're masters at analyzing value trends in Porterville, Tulare County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will often do away with the PMI with little effort. At which time, the homeowner can delight in the savings from that point on.
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