Have equity in your home? Want a lower payment? An appraisal from Mountain High Appraisals, LLC can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. The lender's liability is oftentimes only the difference between the home value and the sum due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and typical value variations in the event a purchaser defaults.
Banks were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the market price of the home is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they obtain the money, and they get paid if the borrower is unable to pay, opposite from a piggyback loan where the lender absorbs 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 homeowners prevent paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook a little early. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Since it can take many years to reach the point where the principal is just 20% of the original amount borrowed, it's important to know how your home has grown in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends indicate declining home values, you should realize that real estate is local.
The hardest thing for many homeowners to know is just when their home's equity rises above 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 Mountain High Appraisals, LLC, we're experts at pinpointing value trends in Denver, Denver County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally remove the PMI with little trouble. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: