Let WalshStreet Appraisals help you discover if you can eliminate your PMI

A 20% down payment is typically accepted when getting a mortgage. The lender's liability is usually only the difference between the home value and the sum remaining on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuations in the event a purchaser is unable to pay.

Lenders were taking down payments discounted to 10, 5 and frequently 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased risk of the low 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 market price of the property is lower than the loan balance.

PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible. It's money-making for the lender because they collect the money, and they are covered if the borrower defaults, as opposed to a piggyback loan where the lender takes in all the costs.


Has your home value appreciated since you first purchased? Call WalshStreet Appraisals today at 323-936-9970 to see if you can cancel your Private Mortgage Insurance payment.

How buyers can prevent bearing the cost of PMI

As a result of The Homeowners Protection Act of 1998, lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on most loans. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook a little earlier.

Because it can take many years to arrive at the point where the principal is only 80% of the initial amount borrowed, it's necessary to know how your California home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not follow national trends and/or your home could have secured equity before the economy simmered down. So even when nationwide trends predict declining home values, you should realize that real estate is local.

The difficult thing for many homeowners to figure out is just when their home's equity goes over the 20% point. A certified, California licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At WalshStreet Appraisals, we know when property values have risen or declined. We're experts at pinpointing value trends in Los Angeles, Los Angeles County, and surrounding areas. When faced with data from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.


Is PMI something increasing your monthly mortgage payment? Call WalshStreet Appraisals today at 323-936-9970 or send us an e-mail. A current appraisal could save you thousands.

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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