Let Crest Appraisal Services help you figure out if you can cancel your PMI
When buying a house, a 20% down payment is typically the standard. Since the liability for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and regular value variationson the chance that a purchaser doesn't 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. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the market price of the home is lower than the balance of the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. It's favorable for the lender because they acquire the money, and they receive payment if the borrower defaults, opposite from a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer avoid paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy homeowners can get off the hook beforehand. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take countless years to get to the point where the principal is only 20% of the original amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends hint at falling home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is 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 masters at analyzing value trends in Seattle, King County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: