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 typically inferred that a 20% down payment is accepted when buying a house. The lender's risk is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value variations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the market price of the property is less than what is owed on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the deficits, PMI is lucrative for the lender because they acquire the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, keen home owners can get off the hook a little early.
Because it can take countless years to reach the point where the principal is just 20% of the initial loan amount, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends signify plummeting home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At Kent & Associates Appraisal, we're masters at pinpointing value trends in Mill Creek, Snohomish County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often remove the PMI with little anxiety. At that 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: