Let Price Appraisals & Realty, LLC help you determine if you can get rid of your PMI
It's typically inferred that a 20% down payment is the standard when purchasing a home. Because the liability for the lender is oftentimes only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and natural value changeson the chance that a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the value of the house is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they acquire the money, and they receive payment if the borrower defaults, contradictory to a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can prevent bearing the expense of PMI
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, keen homeowners can get off the hook a little early.
It can take countless years to reach the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has increased in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends predict falling home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have acquired equity before things calmed down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. 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 recognizing value trends in Lakeway, Travis County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually cancel the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: