Let Binder and Associates (360) 573-8114 help you figure out if you can get rid of your PMI
A 20% down payment is usually the standard when getting a mortgage. The lender's liability is generally only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value changes on the chance that a purchaser defaults.
Lenders were taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the value of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender consumes all the costs, PMI is money-making for the lender because they obtain the money, and they get the money 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 a home owner avoid paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, smart home owners can get off the hook ahead of time.
Since it can take countless years to arrive at the point where the principal is only 20% of the initial loan amount, it's important to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends indicate decreasing home values, you should understand that real estate is local.
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 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 experts at pinpointing value trends in Ridgefield, Clark County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: