Bell Appraisal Services can help you remove your Private Mortgage Insurance
It's typically understood that a 20% down payment is the standard when buying a house. The lender's liability is usually only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value changes in the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the value of the home is lower than the loan balance.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they obtain the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Keen home owners can get off the hook ahead of time. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the original amount borrowed, so it's important to know how your home has increased in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home could have acquired equity before things cooled off, so even when nationwide trends indicate decreasing home values, you should realize that real estate is local.
The difficult thing for almost all home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to keep up with the market dynamics of their area. At Bell Appraisal Services, we know when property values have risen or declined. We're masters at determining value trends in Bakersfield, Kern County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. 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: