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 typically the standard when purchasing a home. The lender's risk is often only the difference between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuations in the event a borrower is unable to pay.
The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender in case a borrower defaults on the loan and the value of the property is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. It's favorable for the lender because they collect the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, savvy homeowners can get off the hook a little earlier.
Because it can take countless years to get to the point where the principal is only 20% of the original loan amount, it's necessary to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends signify falling home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home could have secured equity before things cooled off.
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 tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At Kent & Associates Appraisal, we're experts at analyzing value trends in Mill Creek, Snohomish County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: