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

When buying a house, a 20% down payment is typically the standard. The lender's liability is often only the difference between the home value and the balance remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value variations on the chance that a purchaser defaults.

The market was accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the market price of the house is less than the balance of the loan.

Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender consumes all the damages, PMI is advantageous for the lender because they collect the money, and they are covered if the borrower doesn't pay.

The savings from cancelling the PMI required when you got your mortgage will make up for the cost of the appraisal in no time. Appraisal Professionals, LLC are experts when it comes to value trends in the city of Austin and Travis County. Contact us today.

How can a home buyer prevent bearing the expense of PMI?

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, savvy home owners can get off the hook sooner than expected.

Because it can take a significant number of years to reach the point where the principal is just 80% of the initial amount borrowed, it's essential to know how your Texas home has increased in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not follow national trends and/or your home might have acquired equity before the economy cooled off. So even when nationwide trends signify a reduction in home values, you should know most importantly that real estate is local.

A certified, Texas licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Appraisal Professionals, LLC, we're masters at determining value trends in Austin, Travis County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally drop the PMI with little trouble. At that time, the homeowner can delight in the savings from that point on.

Does your monthly mortgage payment have a lineitem for PMI? 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