Have equity in your home? Want a lower payment? An appraisal from Geist & Associates can help you remove your PMI.
It's widely known that a 20% down payment is accepted when getting a mortgage. The lender's liability is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it was common to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan covers the lender if a borrower doesn't pay on the loan and the market price of the house is less than what is owed on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes 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 receive payment 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 homeowners can refrain from 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 reaches 78 percent of the beginning loan amount. Smart homeowners can get off the hook sooner than expected. The law guarantees that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
Because it can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has grown in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends indicate decreasing home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Geist & Associates, we're experts at determining value trends in Portland metropolitan area and surrounding cities, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little anxiety. At which time, you can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: