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 widely understood that a 20% down payment is the standard when buying a house. The lender's liability is oftentimes only the difference between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value fluctuations on the chance that a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan covers the lender in case a borrower doesn't pay on the loan and the worth of the house is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender takes in all the costs, PMI is favorable for the lender because they obtain the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent bearing the cost of PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, acute homeowners can get off the hook ahead of time.
It can take many years to get to the point where the principal is just 20% of the initial amount of the loan, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood might not be minding the national trends and/or your home may have secured equity before things simmered down, so even when nationwide trends signify plunging home values, you should understand that real estate is local.
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 recognize the market dynamics of their area. At Tri-County Appraisals, we're experts at determining value trends in Loveland, Larimer County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually remove the PMI with little trouble. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: