Have equity in your home? Want a lower payment? An appraisal from Kneeland & Associates can help you get rid of your PMI.A 20% down payment is typically accepted when getting a mortgage. The lender's only risk is usually just the remainder between the home value and the sum due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value changes on the chance that a borrower doesn't pay.The market was working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the value of the house is less than the loan balance. PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and on many occasions isn't even tax deductible. It's lucrative for the lender because they collect the money, and they get paid if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the costs.
How can a buyer avoid bearing the expense of PMI?The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Smart home owners can get off the hook ahead of time. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.It can take many years to arrive at the point where the principal is only 80% of the initial loan amount, so it's important to know how your California home has increased in value. After all, all of the appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not conform to national trends and/or your home may have gained equity before things declined. So even when nationwide trends predict decreasing home values, you should know most importantly that real estate is local. The difficult thing for most people to figure out is whether their home equity has exceeded the 20% point. A certified, California licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At Kneeland & Associates, we know when property values have risen or declined. We're masters at determining value trends in Visalia, Tulare County, and surrounding areas. Faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At which 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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