Let Appraise Colorado Inc help you figure out if you can get rid of your PMI

A 20% down payment is typically accepted when buying a house. Since the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value changesin the event a borrower doesn't pay.

During the recent mortgage upturn of the mid 2000s, it was common to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan guards the lender in the event a borrower is unable to pay on the loan and the market price of the property is less than what the borrower still owes on the loan.

PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the costs, PMI is favorable for the lender because they acquire the money, and they receive payment 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 cost of PMI

The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy home owners can get off the hook sooner than expected. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.

It can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, so it's necessary to know how your home has increased in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends signify decreasing home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things simmered down.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Appraise Colorado Inc, we know when property values have risen or declined. We're experts at analyzing value trends in Parker, Adams County and surrounding areas. Faced with data from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that time, the home owner can enjoy 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