Asset Appraisal Services can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. Because the risk for the lender is oftentimes only the difference between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and natural value changeson the chance that a purchaser is unable to pay.
The market was accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the market price of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI can be costly to a borrower. It's lucrative for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, opposite from 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 a buyer avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little early.
It can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, so it's necessary to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends hint at plummeting home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things settled down.
The toughest thing for almost all 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 understand the market dynamics of their area. At Asset Appraisal Services, we're experts at analyzing value trends in Spokane, Spokane County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At that 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: