Let Appraisal Professionals help you decide if you can eliminate your PMI
It's largely understood that a 20% down payment is the standard when buying a house. The lender's risk is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan guards the lender in the event a borrower is unable to pay on the loan and the value of the house is lower 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 generally isn't even tax deductible. It's profitable for the lender because they obtain the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender takes in 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 buyer keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy homeowners can get off the hook a little early. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Since it can take countless years to get to the point where the principal is only 20% of the original loan amount, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends signify plummeting 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 goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Appraisal Professionals, we know when property values have risen or declined. We're masters at identifying value trends in Kyle, Hays County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often remove the PMI with little trouble. At which 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: