Have equity in your home? Want a lower payment? An appraisal from Zacour & Associates, Inc. can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. Considering the liability for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value variationson the chance that a purchaser defaults.
Banks were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy 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.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender absorbs all the costs, PMI is money-making for the lender because they obtain 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 home buyer refrain from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy home owners can get off the hook sooner than expected. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
It can take countless years to reach the point where the principal is just 20% of the original loan amount, so it's important to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate plunging home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have secured equity before things settled down.
The hardest thing for most home owners to know 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 Zacour & Associates, Inc., we know when property values have risen or declined. We're experts at identifying value trends in El Paso, El Paso County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally do away with the PMI with little effort. At that 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: