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 typically the standard. Because the risk for the lender is usually only the difference between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and regular value variationson the chance that a borrower defaults.
During the recent mortgage boom of the last decade, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. This added policy protects the lender if a borrower defaults on the loan and the value of the house is lower than the loan balance.
Since 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 expensive to a borrower. Different from a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they obtain the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent bearing the expense of PMI
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, acute home owners can get off the hook sooner than expected.
Because it can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, it's important to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends signify plunging home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home could have acquired equity before things settled down.
The difficult thing for most home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our 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 figures from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: