Appraisal Professionals can help you remove your Private Mortgage Insurance
It's generally inferred that a 20% down payment is the standard when getting a mortgage. The lender's liability is usually only the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value changes on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the market price of the house is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI can be pricey to a borrower. It's advantageous for the lender because they obtain the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Wise homeowners can get off the hook ahead of time. The law designates that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
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 essential to know how your home has grown in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things cooled off, so even when nationwide trends forecast decreasing home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Appraisal Professionals, we're experts at pinpointing value trends in Kyle, Hays County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally cancel the PMI with little effort. 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: