SafeValues Inc. can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. The lender's liability is generally only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value variations on the chance that a purchaser is unable to pay.
Banks were working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional plan guards the lender in the event 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 payment and many times isn't even tax deductible, PMI can be expensive to a borrower. It's beneficial for the lender because they secure the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, acute homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is just 20% of the original amount borrowed, so it's crucial to know how your home has grown in value. After all, any appreciation you've obtained over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends signify plummeting home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At SafeValues Inc., we know when property values have risen or declined. We're experts at identifying value trends in Redondo Beach, Los Angeles County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. 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: