Have equity in your home? Want a lower payment? An appraisal from Meier Appraisal Service, Inc. can help you get rid of your PMI.A 20% down payment is typically the standard when buying a house. Considering the liability for the lender is oftentimes only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and natural value changes on the chance that a borrower is unable to pay.
During the recent mortgage boom of the last decade, it was customary to see lenders only asking for down payments of 10, 5, 3 or often 0 percent. A lender is able to endure the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the value of the house is lower than what is owed on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible. Instead of a piggyback loan where the lender absorbs all the damages, PMI is advantageous for the lender because they collect the money, and they get paid if the borrower is unable to pay.
How can a homebuyer refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute homeowners can get off the hook sooner than expected. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take a significant number of years to get to the point where the principal is just 80% of the original amount of the loan, it's important to know how your Washington home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends signify falling home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home might have gained equity before things declined.
An accredited, Washington licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At Meier Appraisal Service, Inc., we're experts at identifying value trends in Everett, Snohomish County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often do away with the PMI with little effort. At that 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: