Have equity in your home? Want a lower payment? An appraisal from Zacour & Associates, Inc. can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. Considering the risk for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and regular value fluctuationson the chance that a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan protects 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.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they collect the money, and they receive payment if the borrower doesn't pay, opposite from a piggyback loan where the lender absorbs all the deficits.
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 prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, wise home owners can get off the hook sooner than expected.
It can take many years to arrive at the point where the principal is only 20% of the original loan amount, so it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends predict declining home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have gained 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's an appraiser's job to keep up with the market dynamics of their area. At Zacour & Associates, Inc., we're experts at determining value trends in El Paso, El Paso County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. 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: