Have equity in your home? Want a lower payment? An appraisal from Crest Appraisal Services can help you get rid of your PMI.
A 20% down payment is usually the standard when buying a house. Because the risk for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value changeson the chance that a purchaser is unable to pay.
Lenders were taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the value of the home is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Contradictory to a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they acquire the money, and they get paid if the borrower doesn't pay.
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 implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook a little early.
Considering it can take countless years to get to the point where the principal is only 20% of the original loan amount, it's necessary to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends signify plummeting home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things settled down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Crest Appraisal Services, we're experts at pinpointing value trends in Seattle, King County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally drop the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: