Let Binder and Associates (360) 573-8114 help you learn if you can cancel your PMI
A 20% down payment is usually accepted when purchasing a home. Because the liability for the lender is usually only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value changeson the chance that a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender in the event a borrower doesn't pay on the loan and the worth of the home is less than what is owed on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. It's advantageous for the lender because they secure the money, and they receive payment if the borrower defaults, opposite from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can avoid paying PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, acute home owners can get off the hook sooner than expected.
It can take countless years to arrive at the point where the principal is just 20% of the original loan amount, so it's essential to know how your home has grown in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends forecast plummeting home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have secured equity before things settled 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 tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Binder and Associates (360) 573-8114, we know when property values have risen or declined. We're masters at recognizing value trends in Ridgefield, Clark County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often do away with the PMI with little trouble. 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: