Have equity in your home? Want a lower payment? An appraisal from Deer Creek Appraisals can help you get rid of your PMI.
It's generally inferred that a 20% down payment is common when buying a house. Since the risk for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value variationson the chance that a borrower is unable to pay.
The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy takes care of the lender in the event a borrower doesn't pay on the loan and the value of the home is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. Opposite from a piggyback loan where the lender consumes all the costs, PMI is favorable for the lender because they collect the money, and they get paid if the borrower is unable to 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 prevent paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart homeowners can get off the hook a little earlier. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take countless years to reach the point where the principal is just 20% of the original loan amount, so it's crucial to know how your home has grown in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict declining home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have gained equity before things settled down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over 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 Deer Creek Appraisals, we know when property values have risen or declined. We're experts at pinpointing value trends in Denver, Jefferson County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally remove the PMI with little effort. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: