Slater Real Estate Services can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when buying a house. The lender's liability is often only the remainder between the home value and the amount due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and typical value changes in the event a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional plan covers the lender in the event a borrower defaults on the loan and the worth of the home is less than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the damages, PMI is advantageous for the lender because they secure the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer prevent bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy home owners can get off the hook ahead of time. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends hint at declining home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things settled down.
The difficult thing for many homeowners to know is just when their home's equity goes over the 20% point. An accredited, 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 know when property values have risen or declined. We're experts at analyzing value trends in Windsor, Weld County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually drop the PMI with little effort. At which 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: