Have equity in your home? Want a lower payment? An appraisal from Ballew & Company can help you get rid of your PMI.When purchasing a home, a 20% down payment is usually the standard. The lender's only exposure is typically just the difference between the home value and the amount due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser is unable to pay.
Lenders were accepting down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the value of the house is less than the loan balance.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. It's profitable for the lender because they obtain the money, and they are covered if the borrower is unable to pay, in contrast to a piggyback loan where the lender consumes all the deficits.
How home buyers can avoid bearing the cost of PMIThe Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, smart home owners can get off the hook a little earlier.
Since it can take several years to reach the point where the principal is just 80% of the initial amount of the loan, it's crucial to know how your California home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not follow national trends and/or your home may have gained equity before the economy simmered down. So even when nationwide trends signify decreasing home values, you should realize that real estate is local.
The difficult thing for most people to determine is whether their home equity has exceeded the 20% point. An accredited, California licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At Ballew & Company, we know when property values have risen or declined. We're experts at analyzing value trends in Sacramento, Sacramento County, and surrounding areas. When faced with data from an appraiser, the mortgage company will most often cancel the PMI with little effort. At which time, the home owner can retain the savings from that point on.
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