Have equity in your home? Want a lower payment? An appraisal from Price Appraisals & Realty, LLC can help you get rid of your PMI.
It's largely inferred that a 20% down payment is common when getting a mortgage. The lender's risk is generally only the remainder between the home value and the amount due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and typical value variations on the chance that a borrower doesn't pay.
Lenders were working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the market price of the house is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible, PMI can be pricey to a borrower. It's advantageous for the lender because they collect the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender takes in 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 homebuyer prevent bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook ahead of time.
It can take many years to reach the point where the principal is just 20% of the initial amount borrowed, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've obtained over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate falling home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things simmered down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Price Appraisals & Realty, LLC, we know when property values have risen or declined. We're masters at determining value trends in Lakeway, Travis County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At which 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: