Have equity in your home? Want a lower payment? An appraisal from Price Appraisals & Realty, LLC can help you get rid of your PMI.
It's widely understood that a 20% down payment is the standard when getting a mortgage. Since the risk for the lender is oftentimes only the difference between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value variationsin the event a borrower defaults.
The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the worth of the property is less than the balance of the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. It's beneficial for the lender because they collect the money, and they get the money if the borrower doesn't pay, contradictory to a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate 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 a little earlier. The law stipulates that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take many years to reach the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends hint at plunging home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things cooled off.
The toughest thing for most home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Price Appraisals & Realty, LLC, we know when property values have risen or declined. We're masters at pinpointing value trends in Lakeway, Travis County and surrounding areas. When faced with data from an appraiser, the mortgage company will often eliminate the PMI with little trouble. 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: