Let Timely Appraisal Services help you discover if you can eliminate your PMI
It's generally inferred that a 20% down payment is common when buying a house. Considering the risk for the lender is generally only the difference between the home value and the amount due on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value changeson the chance that a borrower defaults.
During the recent mortgage boom of the last decade, it became common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender in case a borrower defaults on the loan and the value of the property is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's lucrative for the lender because they collect the money, and they get the money if the borrower is unable to pay, opposite from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer keep from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy home owners can get off the hook a little earlier.
It can take many years to reach the point where the principal is just 20% of the initial amount of the loan, so it's crucial to know how your home has grown in value. After all, any appreciation you've achieved over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends predict declining home values, you should realize that real estate is local.
The hardest thing for many home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to know the market dynamics of their area. At Timely Appraisal Services, we know when property values have risen or declined. We're masters at analyzing value trends in Quinlan, Hunt County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often remove the PMI with little anxiety. At that 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: