Have equity in your home? Want a lower payment? An appraisal from Gold King Appraisals Inc. can help you get rid of your PMI.
A 20% down payment is typically accepted when purchasing a home. Since the liability for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and natural value variationsin the event a purchaser defaults.
Lenders were working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the market price of the house is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender absorbs all the deficits, PMI is favorable for the lender because they collect the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Smart homeowners can get off the hook a little earlier. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's necessary to know how your home has increased in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home could have acquired equity before things calmed down, so even when nationwide trends hint at decreasing home values, you should understand that real estate is local.
The toughest thing for many home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Gold King Appraisals Inc., we know when property values have risen or declined. We're masters at identifying value trends in Rico, Dolores County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often drop the PMI with little trouble. 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: