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 buying a house, a 20% down payment is usually the standard. Since the risk for the lender is often only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and typical value changeson the chance that a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added plan takes care of the lender if a borrower doesn't pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's beneficial for the lender because they secure the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate 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 equals just 80 percent. So, keen homeowners can get off the hook ahead of time.
It can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, so it's important to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends indicate declining home values, you should realize that real estate is local.
The difficult thing for almost all home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At Binder and Associates (360) 573-8114, we know when property values have risen or declined. We're masters at determining value trends in Ridgefield, Clark County and surrounding areas. When faced with data from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: