Binder and Associates (360) 573-8114 can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when buying a house. The lender's liability is oftentimes only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value changes on the chance that a purchaser doesn't pay.
Lenders were working with down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This added plan covers the lender in the event a borrower doesn't pay on the loan and the worth of the house is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they obtain the money, and they receive payment 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 homebuyers avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise home owners can get off the hook a little earlier. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
Since it can take countless years to reach the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends hint at plummeting home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have secured equity before things settled down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above 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 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 data from an appraiser, the mortgage company will often eliminate the PMI with little effort. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: