Price Appraisals & Realty, LLC can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when purchasing a home. Since the risk for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value variationsin the event a purchaser defaults.
Lenders were working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender in case a borrower doesn't pay on the loan and the market price of the home is less than the loan balance.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the damages, PMI is profitable for the lender because they secure the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can refrain from bearing the cost of PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced 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 home owner, the PMI must be released when the principal amount reaches only 80 percent. So, acute home owners can get off the hook a little earlier.
It can take countless years to arrive at the point where the principal is just 20% of the original amount borrowed, 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 your loan balance has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends indicate declining home values, you should realize that real estate is local.
The hardest thing for many homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Price Appraisals & Realty, LLC, we're masters at determining value trends in Lakeway, Travis County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally cancel the PMI with little effort. 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: