Have equity in your home? Want a lower payment? An appraisal from Appraisal Professionals can help you get rid of your PMI.
A 20% down payment is typically accepted when buying a house. The lender's risk is often only the difference between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value changes on the chance that a purchaser defaults.
Banks were taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the additional risk of the small down payment? The solution is 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 worth of the house is lower than what is owed on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they collect 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 can a homebuyer avoid paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, wise home owners can get off the hook a little earlier.
It can take many years to arrive at the point where the principal is just 20% of the initial amount borrowed, so it's necessary to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends hint at declining home values, realize that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have gained equity before things calmed down.
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 tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Appraisal Professionals, we're experts at pinpointing 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 often eliminate the PMI with little effort. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: