Price Appraisals & Realty, LLC can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. Because the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value variationson the chance that a purchaser doesn't pay.
The market was working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental policy guards the lender in case a borrower defaults on the loan and the value of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible, PMI can be pricey to a borrower. It's beneficial for the lender because they collect the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner prevent paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook ahead of time.
It can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's essential to know how your home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends signify plummeting home values, you should realize that real estate is local.
The hardest thing for most home owners to understand 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 keep up with the market dynamics of our area. At Price Appraisals & Realty, LLC, we're experts at analyzing 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 trouble. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: