Centennial Appraisal Group can help you remove your Private Mortgage InsuranceA 20% down payment is typically the standard when getting a mortgage. Because the risk for the lender is generally only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value variations in the event a borrower is unable to pay.During the recent mortgage upturn that our country recently experienced, it became widespread to see lenders making deals with down payments of 10, 5 or sometimes 0 percent. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the value of the home is less than the balance of the loan. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. Instead of a piggyback loan where the lender takes in all the damages, PMI is profitable for the lender because they collect the money, and they get paid if the borrower is unable to pay.
How homeowners can avoid paying PMIThe Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute homeowners can get off the hook a little early. The law states that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.It can take a significant number of years to arrive at the point where the principal is just 80% of the initial loan amount, so it's necessary to know how your Colorado home has increased in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not conform to national trends and/or your home could have acquired equity before things simmered down. So even when nationwide trends signify a reduction in home values, you should realize that real estate is local. The hardest thing for almost all people to figure out is whether their home equity has exceeded the 20% point. An accredited, Colorado licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Centennial Appraisal Group, we know when property values have risen or declined. We're masters at analyzing value trends in Wilmington, Jefferson County, and surrounding areas. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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