Binder and Associates (360) 573-8114 can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. The lender's risk is usually only the remainder between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuations on the chance that a borrower doesn't pay.
Lenders were working with down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender in the event a borrower is unable to pay on the loan and the worth of the house is less than what is owed on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the damages, PMI is advantageous 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 home owners can refrain from paying PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook ahead of time.
It can take countless years to reach the point where the principal is just 20% of the original amount borrowed, so it's essential to know how your home has grown in value. After all, all of the appreciation you've gained over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends forecast plummeting home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things calmed down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Binder and Associates (360) 573-8114, we know when property values have risen or declined. We're experts at recognizing value trends in Ridgefield, Clark County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At which 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: