Slater Real Estate Services can help you remove your Private Mortgage Insurance
It's typically understood that a 20% down payment is the standard when purchasing a home. Since the risk for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and regular value variationsin the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy protects the lender in the event a borrower is unable to pay on the loan and the worth of the property is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's profitable for the lender because they secure the money, and they get the money if the borrower doesn't pay, opposite 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 homebuyers refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, acute homeowners can get off the hook sooner than expected.
It can take countless years to reach the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends signify plummeting home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have acquired equity before things cooled off.
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 hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Slater Real Estate Services, we know when property values have risen or declined. We're masters at analyzing value trends in Windsor, Weld County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. 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: