Have equity in your home? Want a lower payment? An appraisal from JTH Appraisals can help you get rid of your PMI.A 20% down payment is typically accepted when getting a mortgage. The lender's risk is oftentimes only the remainder between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value variations in the event a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders only asking for down payments of 10, 5, 3 or sometimes 0 percent. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the value of the house is less than what the borrower still owes on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's advantageous for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the costs.
How can a homeowner keep from bearing the expense of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. Savvy homeowners can get off the hook ahead of time. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take many years to reach the point where the principal is just 80% of the initial amount borrowed, it's crucial to know how your California home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends forecast falling home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things simmered down.
The toughest thing for most consumers to figure out is whether their home equity has exceeded the 20% point. A certified, California licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At JTH Appraisals, we're masters at recognizing value trends in Elk Grove, Sacramento County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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