Appraise Colorado Inc can help you remove your Private Mortgage Insurance
It's typically understood that a 20% down payment is the standard when purchasing a home. The lender's risk is often only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value changes on the chance that a borrower is unable to pay.
The market was working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower than what is owed on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. It's lucrative for the lender because they secure the money, and they get paid if the borrower doesn't pay, contradictory to a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers refrain from paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart home owners can get off the hook ahead of time. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be following the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends predict plummeting home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At Appraise Colorado Inc, we know when property values have risen or declined. We're masters at recognizing value trends in Parker, Arapahoe County and surrounding areas. Faced with information from an appraiser, the mortgage company will often eliminate the PMI with little effort. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: