Let Appraisal Professionals, LLC help you discover if you can get rid of your PMI
A 20% down payment is typically accepted when getting a mortgage. The lender's liability is oftentimes only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value changes on the chance that a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender endure the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional plan covers the lender in the event a borrower doesn't pay on the loan and the value of the house 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 oftentimes isn't even tax deductible, PMI can be expensive to a borrower. It's lucrative for the lender because they acquire the money, and they get the money if the borrower doesn't pay, separate from a piggyback loan where the lender absorbs 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 buyer avoid paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, keen home owners can get off the hook a little earlier.
It can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has grown in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends indicate decreasing home values, you should understand that real estate is local.
The hardest thing for most homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At Appraisal Professionals, LLC, we know when property values have risen or declined. We're experts at analyzing value trends in Kyle, Hays County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually drop the PMI with little trouble. 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: