VanderWaal Appraisal Group can help you remove your Private Mortgage Insurance
It's generally inferred that a 20% down payment is accepted when purchasing a home. Since the risk for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuationson the chance that a borrower is unable to pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the market price of the property is lower than the balance of the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the damages, PMI is advantageous for the lender because they obtain the money, and they get paid if the borrower defaults.
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
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook ahead of time.
It can take countless years to get to the point where the principal is just 20% of the original amount borrowed, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've obtained over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends signify plummeting home values, you should understand that real estate is local.
The toughest thing for almost all home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At VanderWaal Appraisal Group, we're masters at analyzing value trends in Maple Valley, King 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 remove the PMI with little effort. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: