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.
It's generally known that a 20% down payment is accepted when getting a mortgage. The lender's liability is generally only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and natural value changes in the event a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender manage 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 is unable to pay on the loan and the value of the home is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender consumes all the damages, PMI is advantageous for the lender because they collect the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can refrain from paying PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute homeowners can get off the hook a little earlier. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
Because it can take countless years to arrive at the point where the principal is only 20% of the original amount borrowed, it's important to know how your home has appreciated in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have gained equity before things cooled off.
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 recognize the market dynamics of their area. At Binder and Associates (360) 573-8114, we're masters at determining value trends in Ridgefield, Clark County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little effort. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: