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 largely understood that a 20% down payment is the standard when purchasing a home. The lender's risk is usually only the difference between the home value and the sum due on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and typical value variations in the event a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it became common to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the market price of the home is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. Contradictory to a piggyback loan where the lender absorbs all the deficits, PMI is beneficial for the lender because they obtain the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can prevent bearing the expense of PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Acute homeowners can get off the hook ahead of time. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
Considering it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be following the national trends and/or your home may have gained equity before things cooled off, so even when nationwide trends hint at falling home values, you should realize that real estate is local.
The hardest thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At Binder and Associates (360) 573-8114, we know when property values have risen or declined. We're experts at determining value trends in Ridgefield, Clark County and surrounding areas. When faced with information from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: