Have equity in your home? Want a lower payment? An appraisal from Crockett Appraisal Service, Inc. can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. The lender's risk is oftentimes only the difference between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and regular value changes in the event a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the market price of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. It's profitable for the lender because they secure the money, and they get paid if the borrower defaults, contradictory to a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from paying PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Savvy home owners can get off the hook beforehand. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, so it's essential to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends indicate plummeting home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have gained equity before things calmed 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 difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Crockett Appraisal Service, Inc., we're masters at recognizing value trends in Colorado Springs, El Paso 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 remove 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: