Have equity in your home? Want a lower payment? An appraisal from Slater Real Estate Services can help you get rid of your PMI.
A 20% down payment is typically accepted when purchasing a home. The lender's risk is often only the difference between the home value and the amount due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuations in the event a borrower defaults.
During the recent mortgage boom of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the market price of the property is lower than the loan balance.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. Different from a piggyback loan where the lender takes in all the damages, PMI is advantageous for the lender because they collect the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, savvy home owners can get off the hook sooner than expected.
It can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, so it's necessary to know how your home has appreciated 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 your loan balance has dropped below the 80% mark? Even when nationwide trends hint at declining home values, understand that real estate is local. Your neighborhood may not be minding the national trends and/or your home might have acquired equity before things settled down.
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 is an appraiser's job to know the market dynamics of their area. At Slater Real Estate Services, we know when property values have risen or declined. We're experts at pinpointing value trends in Windsor, Weld County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At which 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: