Let Reeder Appraisal Services, LLC help you learn if you can eliminate your PMIIt's largely inferred that a 20% down payment is the standard when purchasing a home. The lender's liability is often only the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value changes on the chance that a purchaser doesn't pay.
The market was accepting down payments discounted to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. This added plan protects the lender if a borrower is unable to pay on the loan and the value of the house is lower than what the borrower still owes on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and on many occasions isn't even tax deductible. Different from a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they collect the money, and they are covered if the borrower defaults.
How can a homebuyer avoid bearing the cost of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on nearly all loans. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, savvy home owners can get off the hook sooner than expected.
It can take a significant number of years to arrive at the point where the principal is only 80% of the initial loan amount, so it's necessary to know how your Texas home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not follow national trends and/or your home could have secured equity before things simmered down. So even when nationwide trends forecast declining home values, you should know most importantly that real estate is local.
The difficult thing for almost all people to determine is just when their home's equity rises above the 20% point. A certified, Texas licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At Reeder Appraisal Services, LLC, we know when property values have risen or declined. We're experts at determining value trends in South Texas County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little trouble. 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: