Have equity in your home? Want a lower payment? An appraisal from Kent & Associates Appraisal can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. Considering the liability for the lender is often only the difference between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuationsin the event a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became widespread 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. This supplementary plan covers the lender in case a borrower defaults on the loan and the market price of the house is lower than the balance of the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible. Different from a piggyback loan where the lender consumes all the deficits, PMI is profitable for the lender because they collect the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart home owners can get off the hook a little earlier. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, it's crucial to know how your home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends indicate plummeting home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things calmed down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Kent & Associates Appraisal, we're masters at recognizing value trends in Mill Creek, Snohomish County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: