Have equity in your home? Want a lower payment? An appraisal from Slater Real Estate Services can help you get rid of your PMI.
It's generally understood that a 20% down payment is accepted when getting a mortgage. Since the risk for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value variationsin the event a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental plan guards the lender if a borrower doesn't pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender absorbs all the costs, PMI is lucrative for the lender because they acquire 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 a buyer prevent bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Acute homeowners can get off the hook a little early. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
Considering it can take countless years to reach the point where the principal is just 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends signify plummeting home values, you should realize that real estate is local.
The toughest thing for most homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to understand 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. Faced with data from an appraiser, the mortgage company will generally do away with the PMI with little effort. 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: