Have equity in your home? Want a lower payment? An appraisal from Appraisal Professionals can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. The lender's liability is oftentimes only the difference between the home value and the amount due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value changes on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders requiring 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 added policy guards the lender in the event a borrower doesn't pay on the loan and the worth of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Contradictory to a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they acquire the money, and they get the money 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 homeowner prevent bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook ahead of time. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Considering it can take many years to reach the point where the principal is only 20% of the initial loan amount, it's essential to know how your home has grown in value. After all, all of the appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends hint at falling home values, you should understand 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 hard thing to know. It's an appraiser's job to know the market dynamics of their area. At Appraisal Professionals, we know when property values have risen or declined. We're experts at pinpointing value trends in Kyle, Hays County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often eliminate 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: