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 getting a mortgage. The lender's risk is generally only the difference between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value changes on the chance that a borrower doesn't pay.
The market was working with 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 answer is Private Mortgage Insurance or PMI. This supplemental plan protects the lender if a borrower defaults on the loan and the market price of the property is lower than the loan balance.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. It's favorable for the lender because they collect the money, and they get the money if the borrower defaults, different from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, acute home owners can get off the hook a little early.
It can take many years to arrive at the point where the principal is only 20% of the initial loan amount, so it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends forecast decreasing home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have acquired equity before things cooled off.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Tri-County Appraisals, we know when property values have risen or declined. We're masters at recognizing value trends in Loveland, Larimer County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little effort. 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: