Debunking the myths related to PMI Removal
PMI or private mortgage insurance, for those of us not familiar with real estate parlance is a contentious issue and it is one that not many consumers are aware of, and when it comes to PMI Removal, they know even less. There is a great deal of misinformation about PMI and this article attempts to set the records straight.
First off, many consumers when they hear the "insurance" component of PMI assume (mistakenly) that PMI is a positive thing for them and therefore, should be acquired immediately. If they knew the truth, in all likelihood they would be more concerned about PMI Removal, as opposed to PMI renewal!
How does PMI work?
In short, PMI is a form of insurance paid be a debtor whenever they take out a loan for their home, or when they take out a mortgage. The way PMI works is straightforward: if the debtor cannot keep up with their mortgage repayment schedule and the lender is forced to seize the property to recover the mortgage, the PMI policy will indemnify the lender.
PMI's are also used to reimburse the lender in the event that if they are forced to rely on foreclosure of the property in question to recover the money owed, and should the foreclosure not provide the full amount outstanding, the PMI will cover the difference.
In short, PMI benefits one person: the lender. Therefore, not only are you saddled with the financial burden of repaying the mortgage along with the interest rates that the mortgage will incur as time goes on, but you will also be stuck with paying the PMI as well. Little wonder then that PMI Removal is such a big concern!
PMI: nothing more than loaded dice?
As briefly alluded to earlier on in the article, PMI means that the homeowner is saddled with additional expenditure. Even if they are unable to repay their mortgage as a direct result of them being forced to pay the PMI, this makes no difference. Lost your job, recently been divorced, or been diagnosed with a terminal illness? These issues cut no ice with PMI, because you are still expected to pay both the mortgage and the PMI.
PMI Removal is a contentious issue because it places the debtor under undue strain financially, and does it provide them with any sort of benefit or practical protection, indeed, it serves to potentially compound their losses over an extended period of time.
How to achieve PMI Removal quickly?
The best way to achieve PMI Removal is to provide the mortgage lender with a sufficiently large value deposit (typically estimated around 20% of the total net value of the mortgage). If you are able to pay this, you will not need to worry about incurring PMI. That said, many people simply do not have that amount of cash to hand and therefore are forced to take the PMI purely under sufferance.
At 'Appraisal California' we can advice you on the best and most efficient ways to refinance your home so you can comfortably afford the 20% down payment.