Have equity in your home? Want a lower payment? An appraisal from B. Burks & Associates can help you get rid of your PMI.
A 20% down payment is typically the standard when buying a house. Since the liability for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value changeson the chance that a borrower defaults.
Banks were working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the value of the house is less than the loan balance.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. It's money-making for the lender because they acquire the money, and they get the money if the borrower defaults, different from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from bearing the expense of PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, savvy home owners can get off the hook a little early.
It can take countless years to arrive at the point where the principal is just 20% of the original loan amount, so it's necessary to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home might have gained equity before things calmed down, so even when nationwide trends hint at decreasing 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 goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to recognize the market dynamics of their area. At B. Burks & Associates, we know when property values have risen or declined. We're masters at analyzing value trends in Rancho Murieta, Sacramento County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often drop the PMI with little effort. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: