Let Tri-County Appraisals help you determine if you can get rid of your PMI
It's widely known that a 20% down payment is common when purchasing a home. The lender's risk is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. This added plan takes care of the lender in case a borrower doesn't pay on the loan and the worth of the property is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they collect the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer refrain from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, acute home owners can get off the hook sooner than expected.
It can take countless years to arrive at the point where the principal is just 20% of the original loan amount, so it's important to know how your home has increased in value. After all, any appreciation you've acquired over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends hint at declining home values, you should realize that real estate is local.
The difficult thing for many home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our 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. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: