Accurate Valuation LLC can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when getting a mortgage. Since the liability for the lender is generally only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value fluctuationsin the event a borrower defaults.
During the recent mortgage upturn of the last decade, it was common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the worth of the home is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI can be expensive to a borrower. It's favorable for the lender because they collect the money, and they get the money if the borrower doesn't pay, separate from a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can keep from bearing the cost of PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Wise homeowners can get off the hook a little early. The law promises that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take countless years to get to 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, any appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends predict plunging home values, realize that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have gained equity before things simmered down.
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 tough thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Accurate Valuation LLC, we know when property values have risen or declined. We're masters at identifying value trends in Wellington, Larimer County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually cancel the PMI with little effort. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: