Let Cole & Company Appraisal Services, Inc. help you learn if you can get rid of your PMI
A 20% down payment is typically accepted when buying a house. 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 charges of foreclosure, selling the home again, and natural value variations on the chance that a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became common to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender if a borrower doesn't pay on the loan and the value of the house is less than what is owed on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the costs, PMI is money-making for the lender because they acquire the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute homeowners can get off the hook a little early. The law pledges that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
Since it can take countless years to reach the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has increased in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends indicate decreasing home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things calmed down.
A certified, licensed real estate appraiser can help homeowners 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 Cole & Company Appraisal Services, Inc., we know when property values have risen or declined. We're masters at recognizing value trends in Vancouver, Clark County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: