Let Appraise Colorado Inc help you figure out if you can cancel your PMI
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is oftentimes only the difference between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and regular value variations in the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the market price of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible, PMI can be 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 consumes 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 home owners keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, keen homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is just 20% of the initial amount of the loan, so it's important to know how your home has grown in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be minding the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends predict plummeting home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Appraise Colorado Inc, we know when property values have risen or declined. We're masters at determining value trends in Parker, Arapahoe County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally drop the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: