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 largely known that a 20% down payment is common when buying a house. Considering the risk for the lender is often only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value variationson the chance that a borrower 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. A lender is able to endure the increased risk of the small down payment with Private Mortgage Insurance or PMI. This added policy guards the lender in case a borrower doesn't pay on the loan and the market price of the house is lower than what the borrower still owes on the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the losses, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer keep from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen home owners can get off the hook a little earlier.
Because it can take many years to get to the point where the principal is only 20% of the original amount of the loan, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends indicate plunging home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home might have acquired equity before things cooled off.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Appraise Colorado Inc, we know when property values have risen or declined. We're masters at pinpointing value trends in Parker, Douglas County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: