Have equity in your home? Want a lower payment? An appraisal from Price Appraisals & Realty, LLC can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. Because the liability for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuationsin the event a purchaser defaults.
During the recent mortgage upturn of the last decade, it became widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the value of the home is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. It's beneficial 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 takes in 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 home buyers prevent paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook ahead of time.
It can take countless years to arrive at the point where the principal is just 20% of the original loan amount, so it's important to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends indicate plummeting home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things settled down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Price Appraisals & Realty, LLC, we're experts 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 remove the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: