Have equity in your home? Want a lower payment? An appraisal from Kent & Associates Appraisal can help you get rid of your PMI.
When buying a house, a 20% down payment is typically the standard. Because the liability for the lender is often only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value variationsin the event a borrower defaults.
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 handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan protects the lender in the event a borrower is unable to pay on the loan and the value of the property is less than what the borrower still owes on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. It's favorable for the lender because they acquire the money, and they get paid if the borrower doesn't pay, opposite from a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can prevent paying PMI
With the utilization 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 equals 78 percent of the beginning loan amount. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, wise homeowners can get off the hook sooner than expected.
It can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends hint at declining home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have secured equity before things settled down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Kent & Associates Appraisal, we're masters at determining 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 most often eliminate 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: