Have equity in your home? Want a lower payment? An appraisal from Appraisal Professionals, LLC can help you get rid of your PMI.
It's largely understood that a 20% down payment is common when purchasing a home. The lender's risk is generally only the remainder between the home value and the amount due on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value changes on the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it became common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy protects the lender in case a borrower doesn't pay on the loan and the worth of the house is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender absorbs all the damages, PMI is money-making for the lender because they secure the money, and they get the money 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 home owner keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, acute home owners can get off the hook ahead of time.
It can take countless years to reach the point where the principal is just 20% of the original amount borrowed, so it's important to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends indicate decreasing home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Appraisal Professionals, LLC, we know when property values have risen or declined. We're masters at pinpointing value trends in Kyle, Hays County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often do away with the PMI with little trouble. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: