Have equity in your home? Want a lower payment? An appraisal from Golden Appraisals LLC can help you get rid of your PMI.When purchasing a home, a 20% down payment is typically the standard. The lender's only exposure is typically just the difference between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower is unable to pay.
Lenders were working with down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional policy covers the lender in case a borrower doesn't pay on the loan and the market price of the house is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender absorbs all the damages, PMI is lucrative for the lender because they acquire the money, and they get paid if the borrower doesn't pay.
How can a buyer keep from bearing the cost of PMI?The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, wise home owners can get off the hook a little early.
Considering it can take many years to get to the point where the principal is just 80% of the original amount borrowed, it's important to know how your Oregon home has increased in value. After all, any appreciation you've acquired over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not conform to national trends and/or your home may have secured equity before things declined. So even when nationwide trends indicate a reduction in home values, you should realize that real estate is local.
The hardest thing for almost all consumers to determine is just when their home's equity rises above the 20% point. An accredited, Oregon licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Golden Appraisals LLC, we're masters at pinpointing value trends in Redmond, Deschutes County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: