Let Appraisal Professionals help you figure out if you can eliminate your PMI
When buying a house, a 20% down payment is usually the standard. The lender's liability is often only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and regular value changes in the event a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy protects the lender in the event a borrower doesn't pay on the loan and the worth of the home 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 many times isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they obtain 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 homeowner refrain from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, smart home owners can get off the hook ahead of time.
Since it can take many years to reach the point where the principal is just 20% of the original amount of the loan, it's necessary to know how your home has grown in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood might not be minding the national trends and/or your home might have acquired equity before things simmered down, so even when nationwide trends hint at falling home values, you should realize that real estate is local.
The hardest thing for many home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Appraisal Professionals, we're experts at determining value trends in Kyle, Hays County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little effort. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: