Have equity in your home? Want a lower payment? An appraisal from Appraisal Professionals can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. Because the risk for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value variationson the chance that a purchaser is unable to pay.
The market was taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender in case a borrower doesn't pay on the loan and the value of the property is less than the loan balance.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get paid if the borrower doesn't pay, opposite from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners prevent paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute home owners can get off the hook a little early. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take many years to reach the point where the principal is just 20% of the initial amount of the loan, so it's necessary to know how your home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends predict decreasing home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Appraisal Professionals, we know when property values have risen or declined. We're experts at identifying value trends in Kyle, Hays County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually remove the PMI with little trouble. 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: