Let Anderson & Associates help you figure out if you can eliminate your PMI
When getting a mortgage, a 20% down payment is typically the standard. Since the liability for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and regular value fluctuationson the chance that a borrower defaults.
The market was accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the worth of the property is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, separate 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 homebuyers prevent bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, acute home owners can get off the hook ahead of time.
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 crucial to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends predict declining home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Anderson & Associates, we know when property values have risen or declined. We're masters at pinpointing value trends in Vancouver, Clark County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little effort. At which 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:
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