Slater Real Estate Services can help you remove your Private Mortgage Insurance
It's widely understood that a 20% down payment is common when buying a house. Because the risk for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuationsin the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy guards the lender if a borrower defaults on the loan and the value of the house is less than the balance of the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. It's favorable for the lender because they secure the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer prevent bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart home owners can get off the hook sooner than expected. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take countless years to arrive at 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 acquired over the years counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things calmed down, so even when nationwide trends forecast falling home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Slater Real Estate Services, we're experts at pinpointing value trends in Windsor, Weld County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: