Have equity in your home? Want a lower payment? An appraisal from Radius Appraisal, LLC can help you get rid of your PMI.
It's widely known that a 20% down payment is accepted when buying a house. The lender's risk is often only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and regular value changes on the chance that a borrower doesn't pay.
The market was accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan takes care of the lender if a borrower defaults on the loan and the value of the home is lower than what is owed on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the losses, PMI is advantageous for the lender because they secure the money, and they get paid 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 home buyers can keep from paying PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute home owners can get off the hook a little early. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has increased in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends predict falling home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to understand the market dynamics of their area. At Radius Appraisal, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Stanwood, Snohomish County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often remove the PMI with little trouble. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: