Clark Lunde can help you remove your Private Mortgage Insurance
When purchasing a home, 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 amount outstanding on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and regular value changesin the event a borrower defaults.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the market price of the property is less than the loan balance.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. It's beneficial for the lender because they obtain the money, and they get paid if the borrower defaults, different from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Keen home owners can get off the hook a little early. The law promises that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
Considering it can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends hint at plummeting home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Clark Lunde, we're experts at analyzing value trends in ., Riverside County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: