Price Appraisals & Realty, LLC can help you remove your Private Mortgage Insurance
It's widely known that a 20% down payment is the standard when getting a mortgage. The lender's risk is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value changes on the chance that a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. This additional policy covers the lender in the event a borrower defaults on the loan and the market price of the house is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI can be pricey to a borrower. Separate from a piggyback loan where the lender consumes all the costs, PMI is advantageous 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 homebuyers keep 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 terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart homeowners can get off the hook a little early. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
Because it can take many years to arrive at the point where the principal is just 20% of the initial loan amount, it's essential to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home may have secured equity before things cooled off, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
The hardest thing for many home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Price Appraisals & Realty, LLC, we know when property values have risen or declined. We're masters at recognizing value trends in Lakeway, Travis County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally remove the PMI with little effort. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: