Let McLaughlin Property Valuation Services help you decide if you can eliminate your PMI
It's generally known that a 20% down payment is the standard when purchasing a home. Because the risk for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuationson the chance that a borrower doesn't pay.
The market was taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the market price of the property is less than the loan balance.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the deficits, PMI is favorable for the lender because they collect the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers prevent paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, savvy home owners can get off the hook ahead of time.
Since it can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's important to know how your home has increased in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends indicate plummeting home values, you should realize that real estate is local.
The difficult thing for most homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At McLaughlin Property Valuation Services, we're masters at pinpointing value trends in Moreno Valley, Riverside County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: