Let Crest Appraisal Services help you learn if you can get rid of your PMI
When purchasing a home, a 20% down payment is usually the standard. The lender's liability is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser doesn't pay.
The market was taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan protects the lender in the event a borrower is unable to pay on the loan and the value of the house is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Contradictory to a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they secure the money, and they receive payment 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 can buyers avoid paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen home owners can get off the hook sooner than expected.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends forecast declining home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Crest Appraisal Services, we're masters at pinpointing value trends in Seattle, King County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: