Let Timely Appraisal Services help you determine if you can eliminate your PMIWhen getting a mortgage, a 20% down payment is typically the standard. Because the risk 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 charges of foreclosure, reselling the home, and natural value changes on the chance that a borrower is unable to pay.
The market was working with down payments dropping to 10, 5 and frequently 0 percent during the mortgage boom of the last decade. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the value of the home is less than what the borrower still owes on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and on many occasions isn't even tax deductible. Instead of a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they collect the money, and they get paid if the borrower is unable to pay.
How can a home owner keep from paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. Wise home owners can get off the hook a little earlier. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Since it can take several years to arrive at the point where the principal is only 80% of the original amount of the loan, it's important to know how your Texas home has appreciated in value. After all, every bit of appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not conform to national trends and/or your home might have gained equity before things cooled off. So even when nationwide trends predict decreasing home values, you should understand that real estate is local.
An accredited, Texas licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a difficult thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Timely Appraisal Services, we're experts at identifying value trends in Quinlan, Hunt 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 eliminate the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: