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 purchasing a home, a 20% down payment is typically the standard. The lender's liability is often only the difference between the home value and the amount due on the loan, so the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and regular value changes in the event a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the market price of the house is lower than the balance of the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible. Different from a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they obtain the money, and they receive payment 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 buyer prevent bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, savvy home owners can get off the hook a little earlier.
Since it can take many years to get to the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has grown in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends forecast declining home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have acquired equity before things cooled off.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Mountain High Appraisals, LLC, we're experts at recognizing value trends in Denver, Denver County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: