Have equity in your home? Want a lower payment? An appraisal from Binder and Associates (360) 573-8114 can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. The lender's liability is oftentimes only the difference between the home value and the amount due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy guards the lender in the event a borrower defaults on the loan and the value of the property is less than what is owed on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the deficits, PMI is favorable for the lender because they acquire 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 home buyers avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, smart homeowners can get off the hook sooner than expected.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends forecast plunging home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home could have gained equity before things settled down.
The hardest thing for most home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to keep up with the market dynamics of their area. At Binder and Associates (360) 573-8114, we're experts at pinpointing value trends in Ridgefield, Clark County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often cancel the PMI with little effort. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: