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 generally understood that a 20% down payment is accepted when buying a house. The lender's risk is oftentimes only the remainder between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and typical value changes in the event a borrower is unable to pay.
The market was taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional plan takes care of the lender in the event a borrower defaults on the loan and the value of the home is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI is costly to a borrower. Different from a piggyback loan where the lender takes in all the costs, PMI is lucrative for the lender because they collect the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer refrain from bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook a little earlier.
Considering it can take many years to get to the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has grown in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends hint at plummeting home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home might have acquired equity before things cooled off.
A certified, 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. As appraisers, it's our job to recognize the market dynamics of our 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 generally eliminate the PMI with little effort. At which 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: