Price Appraisals & Realty, LLC can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. The lender's liability is generally only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and natural value variations on the chance that a borrower is unable to pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan protects the lender if a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they collect the money, and they receive payment 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 home owners refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel 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 homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook a little earlier.
Considering it can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has grown in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be following the national trends and/or your home could have acquired equity before things calmed down, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their 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 often remove the PMI with little effort. 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: