Price Appraisals & Realty, LLC can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. The lender's risk is generally only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and typical value changes in the event a purchaser defaults.
During the recent mortgage upturn of the last decade, it became customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan guards the lender in case a borrower is unable to pay on the loan and the worth of the house is lower than what is owed on the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. It's profitable for the lender because they secure the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner prevent bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute home owners can get off the hook sooner than expected. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
Since it can take countless years to reach the point where the principal is just 20% of the original amount borrowed, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends indicate falling home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have gained equity before things simmered down.
The toughest thing for many homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to know 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 information from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At which 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: