Have equity in your home? Want a lower payment? An appraisal from Zacour & Associates, Inc. can help you get rid of your PMI.
A 20% down payment is usually accepted when buying a house. The lender's liability is generally only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser doesn't pay.
Lenders were working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional policy covers the lender if a borrower is unable to pay on the loan and the value of the home is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they secure the money, and they get paid if the borrower doesn't pay, 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 homeowners can keep from paying PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Smart home owners can get off the hook sooner than expected. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take countless years to reach the point where the principal is just 20% of the original loan amount, it's essential to know how your home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends predict declining home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things calmed down.
The toughest thing for almost all homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At Zacour & Associates, Inc., we're masters at pinpointing 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 generally do away with the PMI with little trouble. At which 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: