Accurate Valuation LLC can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. Considering the liability for the lender is oftentimes only the remainder between the home value and the amount due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and natural value variationson the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it was common to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added policy 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 balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's advantageous for the lender because they secure the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender consumes all the losses.
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 cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced 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 beforehand. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount borrowed, so it's important to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends forecast plunging home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Accurate Valuation LLC, we're masters at analyzing value trends in Wellington, Larimer County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often do away with 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: