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Let Olsen Residential Appraisers help you discover if you can eliminate your PMI
It's largely understood that a 20% down payment is the standard when purchasing a home.
The lender's only exposure is usually just the remainder between the home value and the balance remaining on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value variations on the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it was common to see lenders making deals with down payments of 10, 5, 3 or often 0 percent.
How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI.
This supplementary plan protects the lender if a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible, PMI can be costly to a borrower.
It's profitable for the lender because they secure the money, and they get paid if the borrower defaults, unlike a piggyback loan where the lender absorbs all the losses.
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Has your real estate appreciated since you first purchased? Contact Olsen Residential Appraisers today at 509.448.4093 to see if you can save money by removing your Private Mortgage Insurance premium.
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How home buyers can prevent paying PMI
The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount.
The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, keen home owners can get off the hook sooner than expected.
It can take many years to get to the point where the principal is just 80% of the initial amount of the loan, so it's crucial to know how your Washington home has increased in value.
After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold?
Even when nationwide trends hint at decreasing home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have gained equity before things declined.
The hardest thing for almost all people to determine is whether their home equity has exceeded the 20% point. An accredited, Washington licensed real estate appraiser can definitely help.
It's an appraiser's job to keep up with the market dynamics of their area.
At Olsen Residential Appraisers, we know when property values have risen or declined. We're experts at recognizing value trends in Spokane, Spokane County, and surrounding areas.
When faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At that time, the home owner can enjoy the savings from that point on.
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Is PMI a part of your monthly mortgage payment? Call Olsen Residential Appraisers today at 509.448.4093 or send us an e-mail. Documentation of your home's present value could save you thousands.
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Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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