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 usually the standard when purchasing a home. The lender's risk is generally only the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value variations in the event a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the worth of the house is lower than the loan balance.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the losses, PMI is beneficial for the lender because they acquire the money, and they get paid 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 home buyers can refrain from bearing the expense of PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook a little earlier.
Because it can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, it's necessary to know how your home has grown in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends signify falling home values, you should realize that real estate is local.
The toughest thing for many home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Slater Real Estate Services, we're experts at identifying value trends in Windsor, Weld 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 most often eliminate the PMI with little anxiety. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: