Have equity in your home? Want a lower payment? An appraisal from Price Appraisals & Realty, LLC can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. The lender's liability is generally only the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and natural value fluctuations in the event a borrower doesn't pay.
Banks were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower defaults on the loan and the market price of the home is less than what is owed on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. It's profitable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, opposite from 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 home owners refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Wise home owners can get off the hook sooner than expected. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
Considering it can take countless years to get to the point where the principal is just 20% of the initial amount borrowed, it's essential to know how your home has appreciated in value. After all, any appreciation you've accomplished over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be minding the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends hint at plummeting home values, you should realize that real estate is local.
The hardest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Price Appraisals & Realty, LLC, we're masters at determining 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 usually remove the PMI with little effort. 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: