NW Valuation Group, LLC. can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. The lender's liability is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and typical value variations in the event a borrower doesn't pay.
Lenders were working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to manage the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This added plan protects the lender in the event a borrower defaults on the loan and the value of the home is lower than the balance of the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the losses, PMI is profitable for the lender because they acquire the money, and they get the money 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 can homeowners prevent paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, savvy home owners can get off the hook sooner than expected.
It can take countless years to arrive at the point where the principal is just 20% of the original loan amount, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have secured equity before things simmered down.
The hardest thing for many home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At NW Valuation Group, LLC., we know when property values have risen or declined. We're masters at recognizing value trends in Vancouver, Clark County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often drop the PMI with little trouble. At which 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: