Let Price Appraisals & Realty, LLC help you learn if you can eliminate your PMI
It's typically understood that a 20% down payment is common when buying a house. Since the liability for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and regular value fluctuationsin the event a purchaser defaults.
During the recent mortgage upturn of the last decade, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the value of the home is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be expensive to a borrower. It's money-making for the lender because they secure the money, and they get the money if the borrower defaults, separate from a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise home owners can get off the hook beforehand. The law promises that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the original amount borrowed, so it's crucial to know how your home has grown in value. After all, all of the appreciation you've accomplished over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends hint at decreasing home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things calmed 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 hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Price Appraisals & Realty, LLC, we're masters at identifying 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 most often do away with the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: