Have equity in your home? Want a lower payment? An appraisal from Kent & Associates Appraisal can help you get rid of your PMI.
A 20% down payment is usually the standard when getting a mortgage. Considering the risk for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value variationson the chance that a purchaser is unable to pay.
The market was taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added policy takes care of the lender in the event a borrower doesn't pay on the loan and the worth of the property is less than what the borrower still owes on the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible. It's beneficial for the lender because they obtain the money, and they get the money if the borrower defaults, opposite from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner avoid paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, acute homeowners can get off the hook ahead of time.
It can take many years to reach the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends signify falling home values, you should understand that real estate is local.
The difficult thing for most homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Kent & Associates Appraisal, we know when property values have risen or declined. We're experts at determining 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 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: