Anderson & Associates can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. Since the risk for the lender is usually only the difference between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and natural value changesin the event a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional plan guards the lender in the event a borrower doesn't pay on the loan and the value of the property is lower than the balance of the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the damages, PMI is lucrative for the lender because they acquire the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart homeowners can get off the hook a little early. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take many years to reach the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things simmered down, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
The toughest thing for most homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Anderson & Associates, we're masters at recognizing value trends in Vancouver, Clark County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often cancel the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Got a Question?
Do you have a question? We can help. Simply fill out the form below and we'll contact you with the answer, with no obligation to you. We guarantee your privacy.