Let Appraisal Professionals, LLC help you learn if you can get rid of your PMI
A 20% down payment is usually the standard when purchasing a home. Since the risk for the lender is generally only the difference between the home value and the amount due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and natural value changeson the chance that a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender if a borrower defaults on the loan and the value of the property is less than the loan balance.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can prevent paying PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute home owners can get off the hook sooner than expected.
Since it can take countless years to reach the point where the principal is just 20% of the original loan amount, it's essential to know how your home has appreciated in value. After all, every bit of 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% mark? Your neighborhood might not be minding the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends signify declining home values, you should understand that real estate is local.
The toughest thing for most home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At Appraisal Professionals, LLC, we know when property values have risen or declined. We're experts at recognizing value trends in Kyle, Hays County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often remove the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: