Appraisal Professionals can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. The lender's liability is oftentimes only the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value variations on the chance that a purchaser defaults.
The market was working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy covers the lender if a borrower doesn't pay on the loan and the value of the house is lower than the balance of the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get paid if the borrower is unable to pay, opposite from a piggyback loan where the lender absorbs 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 homeowners prevent bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise home owners can get off the hook sooner than expected. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Since it can take many years to get to the point where the principal is only 20% of the initial loan amount, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends forecast falling home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have gained equity before things cooled off.
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 is an appraiser's job to keep up with the market dynamics of their area. At Appraisal Professionals, we're experts at recognizing value trends in Kyle, Hays County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: