Have equity in your home? Want a lower payment? An appraisal from GDB Appraisal Services, Inc can help you get rid of your PMI.
A 20% down payment is typically accepted when getting a mortgage. Considering the liability for the lender is oftentimes only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and regular value changeson the chance that a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the worth of the house is less than the loan balance.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get the money if the borrower doesn't pay, separate from 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 home buyers avoid paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is only 20% of the original loan amount, so it's crucial to know how your home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be following the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends predict plunging home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At GDB Appraisal Services, Inc, we're masters at pinpointing value trends in Colorado Springs, 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 do away with the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: