Have equity in your home? Want a lower payment? An appraisal from Tri-County Appraisals can help you get rid of your PMI.
It's largely inferred that a 20% down payment is the standard when buying a house. The lender's liability is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value changes on the chance that a borrower defaults.
The market was taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added plan guards the lender in case a borrower defaults on the loan and the worth of the house is less than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender consumes all the deficits, PMI is beneficial for the lender because they obtain 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 bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise home owners can get off the hook a little earlier. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the original loan amount, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends signify plummeting home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things settled down.
The toughest thing for most home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Tri-County Appraisals, we're experts at identifying value trends in Loveland, Larimer County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually do away with the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: