Crest Appraisal Services can help you remove your Private Mortgage Insurance

It's widely known that a 20% down payment is the standard when getting a mortgage. Since the risk for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value fluctuationson the chance that a purchaser doesn't pay.

During the recent mortgage boom of the last decade, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental policy protects the lender in case a borrower defaults on the loan and the worth of the property is lower than what the borrower still owes on the loan.

PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the costs, PMI is lucrative for the lender because they obtain the money, and they receive payment if the borrower is unable to pay.

How home owners can keep from paying PMI

With the utilization 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 beginning loan amount. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook sooner than expected.

Considering it can take countless years to get to the point where the principal is just 20% of the original amount borrowed, it's crucial to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have acquired equity before things calmed down.

The hardest thing for many home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Crest Appraisal Services, we're experts at determining value trends in Seattle, King County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often remove the PMI with little effort. 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year