Kent & Associates Appraisal can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is common when getting a mortgage. The lender's risk is often only the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value variations on the chance that a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the value of the property is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. It's favorable for the lender because they obtain the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent bearing the cost of PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen homeowners can get off the hook a little earlier. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends hint at plummeting home values, realize that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have secured equity before things simmered down.
The hardest thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, 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 know when property values have risen or declined. We're experts at recognizing value trends in Mill Creek, Snohomish County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often do away with the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: