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

When buying a house, a 20% down payment is usually the standard. Since the risk for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a purchaser is unable to pay.

During the recent mortgage boom of the mid 2000s, it became widespread to see lenders making deals with down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional policy guards the lender in case a borrower defaults on the loan and the market price of the house is lower than what is owed on the loan.

Since 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 expensive to a borrower. As opposed to a piggyback loan where the lender takes in all the damages, PMI is money-making for the lender because they secure the money, and they get the money if the borrower doesn't pay.


Did you secure your mortgage with less than 20% down? Contact 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

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, wise home owners can get off the hook a little early.

It can take several years to arrive at the point where the principal is only 80% of the original amount borrowed, so it's important to know how your California home has grown in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends forecast lower overall home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things declined.

An accredited, California licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At WalshStreet Appraisals, we know when property values have risen or declined. We're masters at recognizing value trends in Los Angeles, Los Angeles County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will often do away with the PMI with little effort. At that time, the homeowner can relish the savings from that point on.


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

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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