Let Crest Appraisal Services help you discover if you can eliminate your PMI
It's largely inferred that a 20% down payment is common when buying a house. Considering the risk for the lender is often only the remainder between the home value and the sum due on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and regular value variationsin the event a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the value of the home is less than what the borrower still owes on the loan.
PMI is costly 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 favorable for the lender because they secure the money, and they get paid if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers keep from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Acute home owners can get off the hook sooner than expected. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
Because it can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends hint at plunging home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home may have gained 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. It is an appraiser's job to recognize the market dynamics of their area. At Crest Appraisal Services, we're masters at recognizing value trends in Seattle, King County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally 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: