Appraise Colorado Inc can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. Since the risk for the lender is generally only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value changeson the chance that a borrower is unable to pay.
The market was accepting down payments down to 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 low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the market price of the property is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's profitable for the lender because they acquire the money, and they receive payment if the borrower defaults, contradictory to a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can refrain from bearing the cost of PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise home owners can get off the hook a little early. The law pledges 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 only 20% of the initial amount of the loan, so it's important to know how your home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends predict falling home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have gained equity before things calmed down.
The toughest thing for many home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's 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 recognizing value trends in Parker, Douglas County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often 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: