Price Appraisals & Realty, LLC can help you remove your Private Mortgage Insurance
It's largely known that a 20% down payment is the standard when purchasing a home. Considering the risk for the lender is often only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and typical value variationson the chance that a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy 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 is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. It's lucrative for the lender because they secure the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the deficits.
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 cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Savvy homeowners can get off the hook a little early. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Because it can take many years to get to the point where the principal is only 20% of the original loan amount, it's important to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends indicate decreasing home values, you should realize that real estate is local.
The toughest thing for most homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our area. At Price Appraisals & Realty, LLC, we're masters at recognizing value trends in Lakeway, Travis County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: