Have equity in your home? Want a lower payment? An appraisal from Crest Appraisal Services can help you get rid of your PMI.
A 20% down payment is usually the standard when getting a mortgage. The lender's liability is oftentimes only the difference between the home value and the sum due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser defaults.
Lenders were accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the worth of the house is less than what the borrower still owes on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. It's money-making for the lender because they collect the money, and they get paid if the borrower is unable to pay, different from a piggyback loan where the lender absorbs 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?
With the employment 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 beginning loan amount. The law states that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, keen home owners can get off the hook a little early.
It can take many years to reach the point where the principal is only 20% of the original loan amount, so it's crucial to know how your home has grown in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be following the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends predict plunging home values, you should realize that real estate is local.
The toughest thing for most home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Crest Appraisal Services, we know when property values have risen or declined. We're masters at identifying value trends in Seattle, King County and surrounding areas. Faced with information from an appraiser, the mortgage company will often cancel 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: