Let Appraisal Professionals, LLC help you learn if you can eliminate your PMI

A 20% down payment is typically accepted when buying a house. Since the liability for the lender is often only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuations in the event a borrower is unable to pay.

The market was accepting down payments discounted to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender in the event a borrower defaults on the loan and the market price of the house is less than what is owed on the loan.

Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's beneficial for the lender because they collect the money, and they are covered if the borrower defaults, as opposed to a piggyback loan where the lender absorbs all the costs.


Is PMI a part of your monthly mortgage payment? Call Appraisal Professionals, LLC today at (512) 535-5007 or send us an e-mail. Documentation of your home's current value could save you thousands.

How can buyers avoid bearing the cost of PMI?

With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on most loans. Acute home owners can get off the hook beforehand. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.

It can take a significant number of years to get to the point where the principal is only 80% of the original amount borrowed, so it's necessary to know how your Texas home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have gained equity before things simmered down.

The toughest thing for most homeowners to figure out is just when their home's equity rises above the 20% point. An accredited, Texas licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Appraisal Professionals, LLC, we know when property values have risen or declined. We're masters at analyzing value trends in Austin, Travis County, and surrounding areas. Faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. At that time, the homeowner can retain the savings from that point on.


Is PMI a part of your monthly mortgage payment? Call Appraisal Professionals, LLC today at (512) 535-5007 or send us an e-mail. A new appraisal could save you thousands.

Want to learn more about PMI and the Homeowners Protection Act? Click this link:

Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year

 


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