Have equity in your home? Want a lower payment? An appraisal from A J REAL ESTATE APPRAISAL SERVICES can help you get rid of your PMI.A 20% down payment is typically accepted when purchasing a home. The lender's only liability is often just the difference between the home value and the amount due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and regular value variations in the event a purchaser defaults.
During the recent mortgage upturn that our country recently experienced, it became customary to see lenders only asking for down payments of 10, 5 or even 0 percent. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the value of the house is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. As opposed to a piggyback loan where the lender absorbs all the damages, PMI is profitable for the lender because they collect the money, and they are covered if the borrower defaults.
How can a home buyer refrain from paying PMI?With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook ahead of time.
It can take several years to get to the point where the principal is just 80% of the original loan amount, so it's essential to know how your California home has grown in value. After all, every bit of appreciation you've achieved over time counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not follow national trends and/or your home could have gained equity before things cooled off. So even when nationwide trends forecast decreasing home values, you should know most importantly that real estate is local.
An accredited, California licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At A J REAL ESTATE APPRAISAL SERVICES, we're experts at determining value trends in Sacramento, Sacramento County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often drop the PMI with little trouble. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: