Absolute Appraisals Inc. can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is typically the standard. Considering the risk for the lender is often only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and regular value variations in the event a purchaser doesn't pay.Banks were working with down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the value of the home is lower than what the borrower still owes on the loan. Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender consumes all the damages, PMI is favorable for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
How can a homeowner refrain from bearing the expense of 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 equals 78 percent of the initial loan amount. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, wise homeowners can get off the hook a little early.Since it can take several years to get to the point where the principal is only 80% of the initial loan amount, it's essential to know how your Colorado home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not adhere to national trends and/or your home might have acquired equity before the economy cooled off. So even when nationwide trends forecast decreasing home values, you should understand that real estate is local. A certified, Colorado licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Absolute Appraisals Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in Greeley, Weld County, and surrounding areas. When faced with information from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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