Howard Goldstein and Associates can help you remove your Private Mortgage InsuranceWhen buying a house, a 20% down payment is typically the standard. Considering the risk for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value variations in the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders making deals with down payments of 10, 5 or even 0 percent. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the value of the home is less than the balance of the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible. Instead of a piggyback loan where the lender consumes all the losses, PMI is beneficial for the lender because they acquire the money, and they are covered if the borrower doesn't pay.
How can buyers keep from paying PMI?With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on nearly all loans. Smart homeowners can get off the hook a little early. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
It can take several years to reach the point where the principal is just 80% of the initial amount borrowed, so it's necessary to know how your California home has grown in value. After all, any appreciation you've obtained over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things simmered down.
The hardest thing for most consumers to determine is whether their home equity has exceeded the 20% point. A certified, 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 Howard Goldstein and Associates, we know when property values have risen or declined. We're experts at determining value trends in Laguna Niguel, Orange County, and surrounding areas. Faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
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