Have equity in your home? Want a lower payment? An appraisal from Brad Brooks & Associates, Inc can help you get rid of your PMI.A 20% down payment is typically the standard when getting a mortgage. The lender's liability is usually only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value variations in the event a borrower defaults.
Lenders were accepting 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 low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower is unable to pay on the loan and the value of the house is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled 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 absorbs all the damages, PMI is lucrative for the lender because they acquire the money, and they get paid if the borrower doesn't pay.
How homeowners can refrain from bearing the expense of PMIThe Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook ahead of time.
It can take many years to arrive at the point where the principal is just 80% of the original loan amount, so it's necessary to know how your Colorado home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not conform to national trends and/or your home could have acquired equity before things cooled off. So even when nationwide trends indicate a reduction in home values, you should realize that real estate is local.
The hardest thing for many people to figure out is whether their home equity has exceeded the 20% point. An accredited, Colorado licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Brad Brooks & Associates, Inc, we know when property values have risen or declined. We're experts at identifying value trends in Superior, Boulder County, and surrounding areas. When faced with data from an appraiser, the mortgage company will most often cancel the PMI with little trouble. 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: