Have equity in your home? Want a lower payment? An appraisal from Centennial Appraisal Group, Inc. can help you get rid of your PMI.When purchasing a home, a 20% down payment is typically the standard. Considering the liability for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuations in the event a purchaser defaults.
Banks were accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the value of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's lucrative for the lender because they acquire the money, and they get the money if the borrower defaults, different from a piggyback loan where the lender takes in all the damages.
How homeowners can avoid paying PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on most loans. Acute homeowners can get off the hook beforehand. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
Since it can take a significant number of years to reach the point where the principal is only 80% of the initial amount of the loan, it's crucial to know how your Colorado home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends signify falling home values, understand that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have gained equity before things declined.
The hardest thing for almost all homeowners to figure out is whether their home equity has exceeded the 20% point. An accredited, Colorado licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At Centennial Appraisal Group, Inc., we know when property values have risen or declined. We're experts at determining value trends in Conifer, Jefferson County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often drop the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
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