APPRAISAL EXPRESS, INC can help you remove your Private Mortgage Insurance
It's typically known that a 20% down payment is the standard when purchasing a home. Since the risk for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and natural value changeson the chance that a purchaser is unable to pay.
The market was accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the market price of the home 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 lumped into the mortgage payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the costs, PMI is favorable for the lender because they collect the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook a little earlier.
Since it can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, it's important to know how your home has appreciated in value. After all, every bit of appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends indicate decreasing home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have secured equity before things calmed down.
The difficult thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At APPRAISAL EXPRESS, INC, we're experts at pinpointing value trends in Durango, La Plata County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often drop the PMI with little effort. 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: