Let Eagle Appraisal Services help you learn if you can cancel your PMIA 20% down payment is typically the standard when getting a mortgage. Since the risk for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value changes in the event a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders reducing down payments to 10, 5, 3 or even 0 percent. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the value of the property is lower than what is owed on the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. Instead of a piggyback loan where the lender absorbs all the deficits, PMI is favorable for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
How can a homebuyer keep from paying PMI?The Homeowners Protection Act of 1998 requires the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Keen homeowners can get off the hook ahead of time. The law stipulates that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take several years to reach the point where the principal is just 80% of the original amount borrowed, so it's necessary to know how your California home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends signify decreasing home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things declined.
A certified, California licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Eagle Appraisal Services, we're masters at pinpointing value trends in Loomis, Placer County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At which time, the home owner can relish the savings from that point on.
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