Have equity in your home? Want a lower payment? An appraisal from My Appraisal Office LLC can help you get rid of your PMI.When purchasing a home, a 20% down payment is usually the standard. Because the risk for the lender is generally only the difference between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value variations on the chance that a borrower defaults.
The market was accepting down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional plan guards the lender if a borrower doesn't pay on the loan and the market price of the home is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI can be expensive to a borrower. It's lucrative for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender absorbs all the deficits.
How homeowners can refrain from bearing the expense of PMIThe Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook ahead of time.
It can take several years to reach the point where the principal is just 80% of the initial amount borrowed, so it's important to know how your Washington home has increased in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not conform to national trends and/or your home may have gained equity before the economy cooled off. So even when nationwide trends indicate falling home values, you should know most importantly that real estate is local.
A certified, Washington licensed real estate appraiser can help home owners figure out if their equity has made it to the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At My Appraisal Office LLC, we know when property values have risen or declined. We're masters at recognizing value trends in Issaquah, King County, and surrounding areas. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little anxiety. 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: