Have equity in your home? Want a lower payment? An appraisal from Appraise Colorado Inc can help you get rid of your PMI.
A 20% down payment is typically accepted when getting a mortgage. The lender's liability is often only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and natural value variations on the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy protects the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they secure the money, and they get the money 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 can buyers keep from paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 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 just 80 percent. So, acute homeowners can get off the hook sooner than expected.
Considering it can take many years to reach the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has grown in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home may have gained 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 tough thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Appraise Colorado Inc, we're experts at analyzing value trends in Aurora, Arapahoe County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At that 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: