Have equity in your home? Want a lower payment? An appraisal from Crest Appraisal Services can help you get rid of your PMI.
It's typically known that a 20% down payment is common when getting a mortgage. The lender's risk is often only the difference between the home value and the amount outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. This added plan protects the lender in case a borrower is unable to pay on the loan and the market price of the house is less than what is owed on the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the costs, PMI is advantageous for the lender because they obtain the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer prevent paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy home owners can get off the hook ahead of time. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, so it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends indicate plummeting home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Crest Appraisal Services, we know when property values have risen or declined. We're experts at recognizing value trends in Seattle, King County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often remove the PMI with little effort. 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: