Have equity in your home? Want a lower payment? An appraisal from Price Appraisals & Realty, LLC can help you get rid of your PMI.
A 20% down payment is typically accepted when purchasing a home. Because the liability for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and typical value fluctuationson the chance that a purchaser is unable to pay.
The market was working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional plan takes care of the lender in case a borrower doesn't pay on the loan and the value of the house is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be costly to a borrower. It's favorable for the lender because they collect the money, and they get paid if the borrower doesn't pay, contradictory to a piggyback loan where the lender absorbs 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 homebuyers avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law designates that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, wise home owners can get off the hook a little early.
Since it can take countless years to reach the point where the principal is only 20% of the original loan amount, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends hint at declining home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things calmed down.
The hardest thing for many homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. 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 analyzing value trends in Lakeway, Travis County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: