Asset Appraisal Services can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when getting a mortgage. The lender's liability is often only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value variations on the chance that a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became common to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the value of the house is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be costly to a borrower. It's favorable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer keep from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Keen home owners can get off the hook ahead of time. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, so it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've gained over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends indicate plummeting home values, you should realize that real estate is local.
The toughest thing for almost all home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Asset Appraisal Services, we're experts at pinpointing value trends in Spokane, Spokane County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often drop the PMI with little trouble. At that 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: