Have equity in your home? Want a lower payment? An appraisal from Zacour & Associates, Inc. can help you get rid of your PMI.
It's generally understood that a 20% down payment is accepted when purchasing a home. The lender's liability is generally only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value variations in the event a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. This additional policy guards the lender in the event a borrower defaults on the loan and the market price of the house is less than the balance of the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. It's favorable for the lender because they collect the money, and they get the money if the borrower defaults, separate from a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can avoid paying PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise home owners can get off the hook sooner than expected. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
Since it can take many years to reach the point where the principal is only 20% of the initial loan amount, it's necessary to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends predict plunging home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Zacour & Associates, Inc., we're masters at recognizing value trends in El Paso, El Paso County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At which 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: