Deer Creek Appraisals can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when buying a house. The lender's risk is usually only the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and typical value changes in the event a borrower is unable to pay.
The market was taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender in the event a borrower doesn't pay on the loan and the value of the home is lower than what the borrower still owes on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the losses, PMI is advantageous for the lender because they collect 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 can a homeowner refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook ahead of time.
It can take countless years to get to the point where the principal is just 20% of the original amount borrowed, so it's important to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home might have acquired equity before things simmered down, so even when nationwide trends predict declining 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 rises above 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 Deer Creek Appraisals, we're experts at analyzing value trends in Denver, Jefferson 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 generally do away with the PMI with little anxiety. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: