Dedicated Appraisal Services, Inc can help you remove your Private Mortgage InsuranceWhen buying a house, a 20% down payment is typically the standard. Considering the risk for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value fluctuations on the chance that a purchaser is unable to pay.
The market was taking down payments as low as 10, 5 and frequently 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy covers the lender in the event a borrower is unable to pay on the loan and the value of the home is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they collect the money, and they get paid if the borrower doesn't pay, in contrast to a piggyback loan where the lender absorbs all the deficits.
How buyers can prevent paying PMIWith the implementation 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 initial loan amount on most loans. Keen homeowners can get off the hook ahead of time. The law states that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take a significant number of years to arrive at the point where the principal is only 80% of the initial amount borrowed, so it's necessary to know how your Texas home has increased in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not follow national trends and/or your home might have acquired equity before things cooled off. So even when nationwide trends hint at decreasing home values, you should know most importantly that real estate is local.
The hardest thing for most consumers to determine is just when their home's equity goes over the 20% point. An accredited, Texas licensed real estate appraiser can definitely help. It's an appraiser's job to know the market dynamics of their area. At Dedicated Appraisal Services, Inc, we're masters at pinpointing value trends in Grapevine, Tarrant County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: