Have equity in your home? Want a lower payment? An appraisal from Deer Creek Appraisals can help you get rid of your PMI.
A 20% down payment is typically the standard when buying a house. Since the liability for the lender is usually only the difference between the home value and the sum due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and regular value variationson the chance that a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the value of the house is less than the loan balance.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. It's lucrative for the lender because they collect the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the deficits.
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 implementation 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 reaches 78 percent of the primary loan amount. Smart homeowners can get off the hook sooner than expected. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.
Since it can take many years to reach the point where the principal is only 20% of the initial amount of the loan, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends predict decreasing home values, realize that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have acquired equity before things settled down.
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. As appraisers, it's our job to understand the market dynamics of our area. At Deer Creek Appraisals, we're experts at determining value trends in Denver, Jefferson County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little effort. 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: