Have equity in your home? Want a lower payment? An appraisal from Sullivan Appraisals can help you get rid of your PMI.When buying a house, a 20% down payment is usually the standard. The lender's liability is oftentimes only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value variations in the event a purchaser doesn't pay.Banks were accepting down payments discounted to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy guards the lender if a borrower is unable to pay on the loan and the market price of the property is less than the balance of the loan. Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI can be costly to a borrower. It's profitable for the lender because they secure the money, and they get paid if the borrower doesn't pay, in contrast to a piggyback loan where the lender takes in all the losses.
How can buyers keep from bearing the expense of PMI?The Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Smart homeowners can get off the hook a little early. The law designates that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.It can take a significant number of years to reach the point where the principal is only 80% of the initial loan amount, so it's important to know how your California home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends predict falling home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home may have gained equity before things declined. The toughest thing for most homeowners to determine is whether their home equity has exceeded the 20% point. A certified, California licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Sullivan Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in Norco, Riverside County, and surrounding areas. Faced with data from an appraiser, the mortgage company will generally cancel the PMI with little effort. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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