Let Kent & Associates Appraisal help you figure out if you can cancel your PMI
When buying a house, a 20% down payment is usually the standard. 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 charges of foreclosure, selling the home again, and typical value variations in the event a borrower is unable to pay.
The market was accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the worth of the house is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender consumes all the damages, PMI is beneficial for the lender because they obtain the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers avoid paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy home owners can get off the hook a little early. The law promises that, at the request of the homeowner, the PMI must be released 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 of the loan, so it's essential to know how your home has grown in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends indicate declining home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have secured equity before things calmed down.
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 difficult thing to know. It is 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 masters at analyzing value trends in Mill Creek, Snohomish County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually remove the PMI with little effort. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: