Let Fahrnkopf Appraisal help you determine if you can cancel your PMIIt's widely inferred that a 20% down payment is the standard when purchasing a home. Since the risk for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuationsin the event a borrower defaults. During the recent mortgage upturn of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional policy takes care of the lender if 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 rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they secure the money, and they receive payment if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the losses. 
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI. How home buyers can refrain from bearing the cost of PMIThe Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Savvy homeowners can get off the hook sooner than expected. The law states that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. It can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends predict decreasing home values, you should realize that real estate is local. The hardest thing for many homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At Fahrnkopf Appraisal, we're experts at recognizing value trends in Oakland, Alameda County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: |