Appraisal Professionals can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is typically the standard. The lender's liability is often only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value fluctuations on the chance that a borrower doesn't pay.
The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower defaults on the loan and the worth of the home is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. Separate from a piggyback loan where the lender absorbs all the costs, PMI is favorable for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can refrain from paying PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is only 20% of the initial amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends forecast plummeting home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things simmered down.
The difficult thing for almost all homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to recognize the market dynamics of their area. At Appraisal Professionals, we're masters at pinpointing value trends in Kyle, Hays County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: