Price Appraisals & Realty, LLC can help you remove your Private Mortgage Insurance
It's generally inferred that a 20% down payment is the standard when buying a house. The lender's liability is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value variations on the chance that a purchaser defaults.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy covers the lender if a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible. It's beneficial for the lender because they secure the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can refrain from bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, savvy homeowners can get off the hook a little earlier.
It can take countless years to get to 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, all of the appreciation you've acquired over the years counts towards abolishing PMI. So why 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 could have acquired equity before things simmered down, so even when nationwide trends signify decreasing home values, you should understand that real estate is local.
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. It's an appraiser's job to understand the market dynamics of their 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 information from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At that 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: