Have equity in your home? Want a lower payment? An appraisal from Crest Appraisal Services can help you get rid of your PMI.
It's widely known that a 20% down payment is the standard when buying a house. The lender's liability is generally only the difference between the home value and the sum due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and regular value fluctuations in the event a borrower defaults.
The market was 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 manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the market price of the home is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender takes in all the losses, PMI is profitable for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners keep from paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Wise home owners can get off the hook a little earlier. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Because it can take many years to get to the point where the principal is just 20% of the initial loan amount, it's important to know how your home has grown in value. After all, any appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends indicate falling home values, understand that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have acquired equity before things simmered down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand 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 often eliminate the PMI with little trouble. 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: