Colorado Appraisal Services can help you remove your Private Mortgage InsuranceIt's typically understood that a 20% down payment is common when getting a mortgage. Since the liability for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value changes in the event a purchaser doesn't pay.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan takes care of the lender in case a borrower doesn't pay on the loan and the market price of the house is less than the loan balance.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the costs, PMI is favorable for the lender because they obtain the money, and they are covered if the borrower doesn't pay.
How can a homeowner refrain from bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on nearly all loans. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook ahead of time.
It can take several years to get to the point where the principal is only 80% of the original amount of the loan, so it's important to know how your Colorado home has increased in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends hint at decreasing home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home could have gained equity before things cooled off.
A certified, Colorado licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Colorado Appraisal Services, we know when property values have risen or declined. We're masters at recognizing value trends in Fort Collins, Larimer County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
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