Have equity in your home? Want a lower payment? An appraisal from Appraise Colorado Inc can help you get rid of your PMI.
It's widely known that a 20% down payment is the standard when purchasing a home. The lender's risk is generally only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and typical value changes in the event a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the market price of the home is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. Opposite from a piggyback loan where the lender absorbs all the damages, PMI is advantageous for the lender because they collect the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can prevent bearing the expense of PMI
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart home owners can get off the hook sooner than expected. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to reach the point where the principal is just 20% of the initial amount of the loan, so it's necessary to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have acquired equity before things calmed down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Appraise Colorado Inc, we know when property values have risen or declined. We're experts at analyzing value trends in Parker, Douglas County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little effort. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: