Have equity in your home? Want a lower payment? An appraisal from James Wagner can help you get rid of your PMI.It's widely understood that a 20% down payment is accepted when buying a house. The lender's only exposure is often just the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower defaults.The market was accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan guards the lender in case 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 lumped into the mortgage payment and on many occasions isn't even tax deductible, PMI is costly to a borrower. As opposed to a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they collect the money, and they receive payment if the borrower doesn't pay.
How home owners can avoid bearing the expense of PMIWith the passage of The Homeowners Protection Act of 1998, lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, smart home owners can get off the hook sooner than expected.It can take several years to arrive at the point where the principal is only 80% of the initial loan amount, so it's necessary to know how your California home has grown in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends indicate falling home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things simmered down. A certified, California licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to recognize the market dynamics of their area. At James Wagner, we know when property values have risen or declined. We're masters at pinpointing value trends in San Jose, Santa Clara County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At that time, the home owner can enjoy 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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