Crest Appraisal Services can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. Because the risk for the lender is often only the difference between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value fluctuationson the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the worth of the home is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender takes in all the costs, PMI is beneficial for the lender because they collect the money, and they get paid 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 avoid bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, savvy home owners can get off the hook sooner than expected.
Since it can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends forecast declining home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things simmered down.
The toughest thing for most home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to know the market dynamics of their area. At Crest Appraisal Services, we know when property values have risen or declined. We're masters at recognizing value trends in Seattle, King County and surrounding areas. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: