Have equity in your home? Want a lower payment? An appraisal from Price Appraisals & Realty, LLC can help you get rid of your PMI.
It's widely understood that a 20% down payment is common when getting a mortgage. The lender's risk is usually only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and regular value changes in the event a purchaser defaults.
Banks were accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender if a borrower is unable to pay on the loan and the value of the house is less than the loan balance.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the losses, PMI is profitable for the lender because they acquire the money, and they get paid if the borrower doesn't pay.
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 refrain from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen home owners can get off the hook sooner than expected.
Since it can take many years to get to the point where the principal is just 20% of the original amount borrowed, it's crucial to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home might have acquired equity before things calmed down.
The toughest thing for many home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Price Appraisals & Realty, LLC, we're masters at pinpointing value trends in Lakeway, Travis County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally cancel the PMI with little effort. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: