Appraisal Group Raines and Phillips can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is typically the standard. Since the liability for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower defaults.
During the recent mortgage upturn of the last decade, it became common to see lenders making deals with down payments of 10, 5, 3 or sometimes 0 percent. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the market price of the property is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they acquire the money, and they are covered if the borrower doesn't pay.
How can home owners avoid bearing the cost of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. Acute home owners can get off the hook sooner than expected. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
Because it can take many years to get to the point where the principal is only 80% of the initial amount of the loan, it's necessary to know how your Washington home has increased in value. After all, any appreciation you've accomplished over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends signify lower overall home values, be aware that real estate is local. Your neighborhood might not be adopting the national trends and/or your home could have secured equity before things declined.
The hardest thing for many consumers to determine is whether their home equity has exceeded the 20% point. A certified, Washington licensed real estate appraiser can surely help. It's an appraiser's job to keep up with the market dynamics of their area. At Appraisal Group Raines and Phillips, we know when property values have risen or declined. We're masters at pinpointing value trends in KENNEWICK, Benton County, and surrounding areas. Faced with information from an appraiser, the mortgage company will often drop the PMI with little trouble. At that time, the homeowner can enjoy the savings from that point on.
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