Let Tri-County Appraisals help you learn if you can eliminate your PMIIt's typically understood that a 20% down payment is accepted when purchasing a home. Considering the risk for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and regular value changes on the chance that a borrower is unable to pay.
The market was working with down payments dropping to 10, 5 and frequently 0 percent during the mortgage boom of the last decade. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender in the event a borrower defaults on the loan and the market price of the home is lower than the loan balance.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. It's favorable for the lender because they secure the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender absorbs all the costs.
How can a home owner refrain from bearing the cost of PMI?The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Savvy homeowners can get off the hook a little earlier. The law promises that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take several years to get to the point where the principal is just 80% of the initial loan amount, so it's essential to know how your Colorado home has grown in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things declined.
An accredited, Colorado licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a tough thing to know. It's an appraiser's job to know the market dynamics of their area. At Tri-County Appraisals, we're masters at identifying value trends in Loveland, Weld 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 often do away with the PMI with little trouble. At which time, the home owner can delight in the savings from that point on.
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