Let Price Appraisals & Realty, LLC help you figure out if you can get rid of your PMI
It's typically understood that a 20% down payment is common when purchasing a home. Considering the liability for the lender is generally only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value variationsin the event a purchaser defaults.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the value of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI is pricey to a borrower. Opposite from a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they secure 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 a home owner prevent bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is only 20% of the original loan amount, so it's essential to know how your home has appreciated in value. After all, any appreciation you've accomplished over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends hint at falling home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have gained equity before things settled down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their 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. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little effort. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: