Have equity in your home? Want a lower payment? An appraisal from Binder and Associates (360) 573-8114 can help you get rid of your PMI.
It's widely inferred that a 20% down payment is common when buying a house. Considering the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuationsin the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it was common to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender takes in all the deficits, PMI is profitable for the lender because they obtain the money, and they get the money 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 homebuyers prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute homeowners can get off the hook a little earlier. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Because it can take countless years to get to the point where the principal is just 20% of the original amount borrowed, it's important to know how your home has grown in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends hint at falling home values, understand that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have gained equity before things settled down.
The difficult thing for almost all home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to know the market dynamics of their area. At Binder and Associates (360) 573-8114, we're masters at analyzing value trends in Ridgefield, Clark County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: