Have equity in your home? Want a lower payment? An appraisal from Crest Appraisal Services can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. Since the liability for the lender is often only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value variationsin the event a borrower doesn't pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional policy covers the lender in the event a borrower doesn't pay on the loan and the value of the house is less than what the borrower still owes on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. It's advantageous for the lender because they acquire the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute homeowners can get off the hook a little early.
It can take many years to arrive at the point where the principal is only 20% of the original loan amount, so it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends indicate plummeting home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have acquired equity before things cooled off.
The toughest thing for most home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Crest Appraisal Services, we know when property values have risen or declined. We're experts at analyzing value trends in Seattle, King County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. 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: