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What is PMI and how to get rid of it.
It has become more common to see home buyers using very low down payments. Loaning this much presents the lenders with more risk. To offset this risk, these loans often require Private Mortgage Insurance or PMI. This insurance protects the lender if the borrower defaults, and the value of the house is less than existing loan balance.
The amount of the insurance, often $50-$100 per month for a $250,000 house, is included in mortgage payment. Homeowners can continue to pay the PMI even after their loan balance has dropped below the original 80 percent threshold. This occurs naturally, of course, as the home owner pays down the principal on the loan or if the property appreciates. On a typical 30-year loan, however, it can take many years to reach that point, depending on appreciation rates.
Until 1999 lenders were not required to tell home owners that they had reached an loan to value ratio where the PMI can be removed. In most cases, this law obligates lenders to terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan. Homeowners can remove PMI earlier. The law states that, upon request of the home owner, the PMI must be removed when the principal reaches only 80 percent.
Certain other conditions must be met, such as being current on the payments. Buyers that purchased before July 1999 can also remove their PMI, but they must initiate the process through the lender.
Appreciation:
Many areas of the United States have seen significant gains in the value of real estate over the past decade, though some, have declined significantly recently. Some areas have seen appreciation levels of 100 percent in the last 10 years. Borrowers living in areas with lesser gains may find that the value of their property has grown so that the principal is less than 80 percent of the current value. In most cases,as long as the borrower has no late payments and don't represent an exceptional risk, the lenders will remove the PMI.
How do I know if I can remove PMI?
A certified appraisal, by a licensed appraiser can provide proof that the equity has risen above 20 percent point. We know when property values have risen - or declined. We offer specific services to help home owners determine the value of their homes and remove PMI. The lender will remove PMI with a submitted certified appraisal and other documentation. Most lenders have a PMI removal department. The savings from dropping the PMI pays for the appraisal very quickly.
Private Mortgage Insurance Resources:
Cancelation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
Private Mortgage Insurance (PMI): Law Requires Lenders to Cancel PMI
Useful Blog entry regarding PMI requirements
We can provide PMI removal appraisals for you. The typical fee is $350.00. We can do PMI removal appraisals in all of the areas that we service (Sacramento, Elk Grove, Roseville, etc): Service area
Please have any paperwork from your lender ready. We will send the appraisal directly to the correct department of your lender. Let us help you save money!
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