D. Michael Rogers can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. The lender's liability is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it became customary to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the value of the house is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Contradictory to a piggyback loan where the lender absorbs all the costs, PMI is favorable for the lender because they secure the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner avoid bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is only 20% of the original loan amount, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be following the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends signify declining home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to recognize the market dynamics of their area. At D. Michael Rogers, we know when property values have risen or declined. We're experts at identifying value trends in Huntington Beach, Orange County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally drop 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: