Willamette Valley Appraisal Professionals can help you remove your Private Mortgage InsuranceIt's generally known that a 20% down payment is common when buying a house. The lender's only risk is often just the remainder between the home value and the balance outstanding on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and regular value changes in the event a purchaser doesn't pay.
Banks were accepting down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary policy protects the lender in the event a borrower doesn't pay on the loan and the market price of the house is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. It's favorable for the lender because they acquire the money, and they get the money if the borrower is unable to pay, separate from a piggyback loan where the lender takes in all the damages.
How home buyers can prevent paying PMIThe Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise homeowners can get off the hook sooner than expected. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
Because it can take several years to arrive at the point where the principal is only 80% of the original amount borrowed, it's essential to know how your Oregon home has appreciated in value. After all, any appreciation you've achieved over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not follow national trends and/or your home could have acquired equity before things cooled off. So even when nationwide trends indicate falling home values, you should understand that real estate is local.
A certified, Oregon licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Willamette Valley Appraisal Professionals, we're experts at analyzing value trends in Milwaukie, 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 remove the PMI with little anxiety. At that time, the home owner can delight in the savings from that point on.
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