Kiesz & Associates, LLC can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is often only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value variations in the event a purchaser defaults.
Lenders were working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional plan takes care of the lender if a borrower defaults on the loan and the worth of the property is less than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the losses, PMI is money-making 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 can buyers refrain from paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen home owners can get off the hook sooner than expected.
Considering it can take many years to get to the point where the principal is just 20% of the original loan amount, it's important to know how your home has appreciated in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends hint at decreasing home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things cooled off.
The hardest thing for most homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to recognize the market dynamics of their area. At Kiesz & Associates, LLC, we're masters at recognizing value trends in Vancouver, Clackamas County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. 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: