Have equity in your home? Want a lower payment? An appraisal from Appraisal Professionals can help you get rid of your PMI.
It's largely known that a 20% down payment is accepted when getting a mortgage. Because the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuationsin the event a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became common to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender in case a borrower defaults on the loan and the worth of the property is less than what is owed on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the deficits, PMI is profitable for the lender because they secure the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen home owners can get off the hook a little early.
Considering it can take countless years to reach the point where the principal is only 20% of the original amount borrowed, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends indicate falling home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home might have secured equity before things calmed down.
The toughest thing for almost all homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to keep up with the market dynamics of their area. At Appraisal Professionals, we know when property values have risen or declined. We're masters at recognizing value trends in Kyle, Hays County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually drop the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: