Have equity in your home? Want a lower payment? An appraisal from Crest Appraisal Services can help you 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 sum outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value variations on the chance that a borrower is unable to pay.
Lenders were working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the market price of the house is lower than what the borrower still owes on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. It's profitable for the lender because they acquire the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender takes in 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 buyer keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise homeowners can get off the hook a little early. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends signify declining home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have gained equity before things calmed down.
The difficult thing for almost all homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Crest Appraisal Services, we know when property values have risen or declined. We're masters at determining value trends in Seattle, King County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: