Deer Creek Appraisals can help you remove your Private Mortgage Insurance

It's generally inferred that a 20% down payment is common when getting a mortgage. Since the risk for the lender is generally only the difference between the home value and the amount remaining on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value changeson the chance that a borrower doesn't pay.

During the recent mortgage upturn of the mid 2000s, it was common to see lenders requiring 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 guards the lender if a borrower is unable to pay on the loan and the worth of the property is less than what is owed on the loan.

Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they acquire the money, and they get paid if the borrower defaults, contradictory to a piggyback loan where the lender takes in all the deficits.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How can a homebuyer keep from paying PMI?

The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, keen homeowners can get off the hook a little earlier.

Since it can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, it's crucial to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be minding the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends indicate declining home values, you should understand that real estate is local.

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 hard thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Deer Creek Appraisals, we're experts at determining value trends in Denver, Jefferson County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At that 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year