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.
A 20% down payment is typically accepted when purchasing a home. Because the liability for the lender is usually only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuationson the chance that a borrower is unable to pay.
During the recent mortgage boom of the last decade, it was common to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender in case a borrower is unable to pay on the loan and the market price of the property is less than the balance of the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. It's money-making for the lender because they acquire the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners prevent bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 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 equals just 80 percent. So, savvy home owners can get off the hook sooner than expected.
Considering it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has increased in value. After all, all of the appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends signify falling home values, you should understand that real estate is local.
The difficult thing for almost all home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to understand 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. When faced with data from an appraiser, the mortgage company will generally drop the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: