Have equity in your home? Want a lower payment? An appraisal from Tri-County Appraisals can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. Since the liability for the lender is generally only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value variationsin the event a borrower is unable to pay.
Lenders were working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added plan guards the lender in the event a borrower is unable to pay on the loan and the market price of the property is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's profitable for the lender because they acquire 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 can a home buyer keep from bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy home owners can get off the hook a little early. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
Because it can take countless years to arrive at the point where the principal is just 20% of the original amount borrowed, it's important to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends forecast plummeting home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have gained equity before things settled down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At Tri-County Appraisals, we're experts at pinpointing value trends in Loveland, Larimer County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: