Let Zacour & Associates, Inc. help you discover if you can eliminate your PMI
A 20% down payment is usually the standard when getting a mortgage. Since the risk for the lender is oftentimes only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and regular value changesin the event a borrower is unable to pay.
Lenders were working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan covers the lender if a borrower is unable to pay on the loan and the value of the home is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender absorbs all the damages, PMI is profitable 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 homeowner avoid bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook sooner than expected. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Considering it can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends forecast declining home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At Zacour & Associates, Inc., we're experts at identifying value trends in El Paso, El Paso County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: