Have equity in your home? Want a lower payment? An appraisal from Appraise Colorado Inc can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. Because the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value changesin the event a purchaser is unable to pay.
The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the worth of the home is lower than the loan balance.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get paid if the borrower defaults, unlike a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners avoid paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy homeowners can get off the hook sooner than expected. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's crucial to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends predict plummeting home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things cooled off.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Appraise Colorado Inc, we know when property values have risen or declined. We're experts at pinpointing value trends in Parker, Arapahoe County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At which 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: