Have equity in your home? Want a lower payment? An appraisal from Appraisal Professionals, LLC can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. Considering the liability for the lender is oftentimes only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value variationsin the event a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the value of the home is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. It's advantageous for the lender because they acquire the money, and they receive payment if the borrower defaults, opposite from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise home owners can get off the hook a little earlier. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take many years to get to the point where the principal is just 20% of the initial amount borrowed, so it's essential to know how your home has grown in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends hint at decreasing home values, you should understand that real estate is local.
The toughest thing for many homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our 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. When faced with figures from an appraiser, the mortgage company will often do away with the PMI with little trouble. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: