Accurate Valuation LLC can help you remove your Private Mortgage Insurance
It's generally known that a 20% down payment is the standard when getting a mortgage. Because the liability for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuationson the chance that a borrower defaults.
The market was accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the value of the house is lower than what the borrower still owes on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the costs, PMI is advantageous for the lender because they obtain the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook sooner than expected.
Considering it can take many years to get to the point where the principal is just 20% of the original amount borrowed, it's essential to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends signify plunging home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to understand 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. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: