Let Zacour & Associates, Inc. help you determine if you can eliminate your PMI
It's generally inferred that a 20% down payment is accepted when getting a mortgage. Because the risk for the lender is often only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuationsin the event a purchaser defaults.
The market was taking down payments as low as 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. This supplemental policy covers the lender in case a borrower is unable to pay on the loan and the value of the property is less than the balance of 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 oftentimes isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they receive payment if the borrower defaults, different 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 a home owner keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, smart homeowners can get off the hook a little earlier.
Since it can take many years to get to the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends hint at declining home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home might have secured equity before things calmed down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Zacour & Associates, Inc., we know when property values have risen or declined. We're experts at determining value trends in El Paso, El Paso County and surrounding areas. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little effort. At that 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: