Let Binder and Associates (360) 573-8114 help you decide if you can get rid of your PMI
A 20% down payment is typically accepted when purchasing a home. Since the risk for the lender is often only the difference between the home value and the amount due on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value variationson the chance that a purchaser doesn't pay.
Banks were accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan guards the lender if a borrower defaults on the loan and the worth of the home is lower than what is owed on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the deficits, PMI is profitable for the lender because they acquire 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 homebuyers can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Keen home owners can get off the hook sooner than expected. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
Since it can take many years to get to the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has grown in value. After all, all of the appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends indicate falling home values, realize that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have secured equity before things simmered down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Binder and Associates (360) 573-8114, we know when property values have risen or declined. We're masters at analyzing value trends in Ridgefield, Clark County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often remove 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: