Let Kent & Associates Appraisal help you learn if you can cancel your PMI
A 20% down payment is usually the standard when getting a mortgage. Considering the liability for the lender is oftentimes only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and regular value variationson the chance that a purchaser defaults.
During the recent mortgage upturn of the last decade, it was common to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the worth of the house is lower than the loan balance.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. It's money-making for the lender because they obtain the money, and they get the money if the borrower defaults, separate from a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Acute homeowners can get off the hook beforehand. The law promises that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
Because it can take countless years to get to the point where the principal is only 20% of the initial loan amount, it's necessary to know how your home has appreciated in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends forecast plunging home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have gained equity before things simmered down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At Kent & Associates Appraisal, we know when property values have risen or declined. We're masters at identifying value trends in Mill Creek, Snohomish County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often drop the PMI with little trouble. At which 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: