Appraisal Professionals, LLC can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when buying a house. The lender's risk is oftentimes only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and natural value changes in the event a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender endure the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the worth of the home is lower than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender consumes all the costs, PMI is favorable for the lender because they secure the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner avoid paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute homeowners can get off the hook ahead of time. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
It can take many years to get to the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends indicate plunging home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home could have secured equity before things simmered down.
The toughest thing for most home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At Appraisal Professionals, LLC, we're experts at analyzing value trends in Kyle, Hays County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: