Let Sizemore Appraisal Services, LLC help you learn if you can eliminate your PMIWhen buying a house, a 20% down payment is usually the standard. The lender's only risk is often just the difference between the home value and the amount due on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value changes in the event a purchaser doesn't pay.During the recent mortgage upturn that our country recently experienced, it became common to see lenders reducing down payments to 10, 5, 3 or often 0 percent. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the market price of the house is less than what is owed on the loan. Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible, PMI can be costly to a borrower. As opposed to a piggyback loan where the lender takes in all the deficits, PMI is advantageous for the lender because they acquire the money, and they receive payment if the borrower defaults.
How can homebuyers avoid paying PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart homeowners can get off the hook ahead of time. The law promises that, upon request of the home owner, the PMI must be abandoned 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 of the loan, so it's important to know how your Texas home has increased in value. After all, every bit of appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not conform to national trends and/or your home could have secured equity before things simmered down. So even when nationwide trends predict falling home values, you should know most importantly that real estate is local. The toughest thing for most people to figure out is whether their home equity has exceeded the 20% point. An accredited, Texas licensed real estate appraiser can definitely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Sizemore Appraisal Services, LLC, we're experts at identifying value trends in Dallas, Kaufman 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 generally cancel the PMI with little anxiety. At that time, the home owner can delight in 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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