Slater Real Estate Services can help you remove your Private Mortgage Insurance
It's largely inferred that a 20% down payment is common when buying a house. The lender's liability is oftentimes only the difference between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and natural value changes in the event a borrower defaults.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender in case a borrower defaults on the loan and the value of the home is lower than the loan balance.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is profitable for the lender because they collect the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart homeowners can get off the hook sooner than expected. The law promises 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 borrowed, so it's important to know how your home has increased in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home may have secured equity before things cooled off, so even when nationwide trends indicate decreasing home values, you should realize that real estate is local.
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 tough thing to know. As appraisers, it's our job to understand 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 generally eliminate the PMI with little effort. At that 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: