Have equity in your home? Want a lower payment? An appraisal from Kent & Associates Appraisal can help you get rid of your PMI.
It's largely known that a 20% down payment is the standard when buying a house. Because the risk for the lender is generally only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value changesin the event a purchaser is unable to pay.
Banks were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the worth of the home is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's beneficial for the lender because they secure the money, and they get paid if the borrower doesn't pay, separate from a piggyback loan where the lender absorbs 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 expense of PMI
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, smart home owners can get off the hook a little earlier.
It can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, so it's crucial to know how your home has appreciated in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends predict plummeting home values, you should understand that real estate is local.
The hardest thing for most homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At Kent & Associates Appraisal, we're experts at analyzing value trends in Mill Creek, Snohomish County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often drop the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: