Have equity in your home? Want a lower payment? An appraisal from Wood Appraisal can help you get rid of your PMI.It's generally understood that a 20% down payment is common when purchasing a home. Considering the liability for the lender is often only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and typical value fluctuations on the chance that a borrower doesn't pay.During the recent mortgage boom that our country recently experienced, it was common to see lenders only asking for down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This added policy protects the lender in case a borrower is unable to pay on the loan and the value of the property is lower than what is owed on the loan. Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. As opposed to a piggyback loan where the lender takes in all the deficits, PMI is profitable for the lender because they acquire the money, and they get paid if the borrower defaults.
How can homeowners keep from bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, smart homeowners can get off the hook sooner than expected.Considering it can take several years to reach the point where the principal is only 80% of the original amount of the loan, it's crucial to know how your Texas home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not follow national trends and/or your home might have gained equity before things declined. So even when nationwide trends predict a reduction in home values, you should understand that real estate is local. The hardest thing for almost all 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. As appraisers, it's our job to recognize the market dynamics of our area. At Wood Appraisal, we know when property values have risen or declined. We're masters at determining value trends in Austin, Hays County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will often remove the PMI with little trouble. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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