Have equity in your home? Want a lower payment? An appraisal from Routt County Appraisers can help you get rid of your PMI.
It's typically known that a 20% down payment is common when buying a house. Since the risk for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value fluctuationsin the event a purchaser defaults.
Lenders were working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the worth of the house is less than the loan balance.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. It's profitable for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, unlike a piggyback loan where the lender absorbs all the losses.
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 refrain from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Keen homeowners can get off the hook ahead of time. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take countless years to get to the point where the principal is only 20% of the original amount borrowed, so it's necessary to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood might not be minding the national trends and/or your home may have gained equity before things cooled off, so even when nationwide trends indicate decreasing home values, you should realize that real estate is local.
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 difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Routt County Appraisers, we know when property values have risen or declined. We're experts at recognizing value trends in Steamboat Springs, Routt County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At that 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: