Let ELP Appraisals, LLC help you decide if you can eliminate your PMI
When getting a mortgage, a 20% down payment is usually the standard. The lender's risk is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and regular value variations in the event a purchaser doesn't pay.
Banks were accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan guards the lender in the event a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender takes in all the deficits, PMI is profitable for the lender because they obtain 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 homeowners avoid bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook ahead of time.
It can take many years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has appreciated in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends indicate plunging home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have secured equity before things simmered down.
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 tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At ELP Appraisals, LLC, we know when property values have risen or declined. We're masters at pinpointing value trends in El Paso, El Paso County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually remove the PMI with little effort. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: