Have you been paying private mortgage insurance (PMI) for a while and wondering how to drop it? You’re not alone. Many homeowners are in the same boat, looking for ways to save on their monthly mortgage payments. One effective way is through a broker opinion of value (BOV) or an appraisal. But there’s more to it than just PMI savings. In this post, we’ll explore how to prepare for the BOV or appraisal, compare the two, and highlight additional benefits of having an up-to-date home valuation.
What is a BOV or Appraisal?
A BOV is typically performed by a real estate agent and is generally a less formal evaluation of your home’s worth. An appraisal is conducted by a licensed professional appraiser who follows stricter guidelines and provides a detailed, comprehensive analysis of your home’s market value.
Dropping PMI: Which Method is Right for You?
When it comes to dropping PMI, an appraisal is usually the better option. Here’s why:
- Credibility: Lenders trust appraisals more than BOVs since they follow formal protocols.
- Accuracy: Appraisals offer a more detailed look at your property, taking into account recent comparable sales, the home’s condition, and other market trends.
- Lender Acceptance: Most lenders require an appraisal to confirm the home’s increased value before dropping PMI.
However, it’s essential to check with your lender to see if they accept a BOV, as it can sometimes be a quicker and cheaper route.
Preparing for Your BOV or Appraisal
To ensure the best results from your appraisal or BOV, take these steps:
- Clean and declutter to make your home look its best.
- Make minor repairs, especially any that might cost $500 or more, as appraisers note these as necessary for home value assessment.
- Enhance curb appeal by tidying the yard and improving the exterior.
- Organize documents related to recent home improvements, which can help support a higher valuation.
- Secure pets to avoid distractions and ensure a smooth inspection.
What to Expect: Timeline and Process
- Scheduling the appointment: Takes about 1-2 weeks.
- Walkthrough: Generally lasts 30 minutes to 1 hour.
- Receiving results: 2-3 days for BOV, 1-2 weeks for an appraisal.
- Lender review: Takes an additional 1-2 weeks.
- PMI removal: Typically reflected in 1-2 billing cycles.
Additional Benefits of a Home Appraisal or BOV
Besides dropping PMI, an appraisal or BOV has multiple uses:
- Refinancing Options: A higher home value can qualify you for better interest rates or a cash-out refinance.
- HELOCs or Home Equity Loans: Tap into your increased equity for renovations or other expenses.
- Property Tax Reassessment: If the appraised value is lower than your current tax assessment, you might be able to lower your property taxes.
- Estate Planning: An accurate valuation is useful for structuring a will or trust.
- Insurance Review: Make sure your coverage is adequate based on your home’s replacement cost.
- Selling Your Home: Set a realistic asking price and negotiate with potential buyers confidently.
- Divorce or Separation Settlements: Use the appraisal to determine fair property division.
- Business Loan Collateral: Demonstrate your assets’ value for securing a loan.
Final Thoughts
Whether you’re focused on dropping PMI, planning for a sale, or looking to refinance, having an accurate and updated valuation of your home is beneficial in many ways. It can save you money, unlock new financial opportunities, and provide peace of mind. Be proactive and use your home’s equity to your advantage.