Have equity in your home? Want a lower payment? An appraisal from Valley Appraisal Services can help you get rid of your PMI.A 20% down payment is usually the standard when getting a mortgage. Since the liability for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value changes on the chance that a purchaser defaults.During the recent mortgage boom of the mid 2000s, it became common to see lenders only asking for down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy takes care of the lender in the event a borrower is unable to pay on the loan and the value of the property is lower than what is owed on the loan. PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they collect the money, and they get paid if the borrower doesn't pay.
How can a home owner refrain from bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook ahead of time.Since it can take a significant number of years to arrive at the point where the principal is only 80% of the initial amount borrowed, it's crucial to know how your Texas home has grown in value. After all, all of the appreciation you've obtained over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Even when nationwide trends hint at lower overall home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have secured equity before things declined. An accredited, Texas licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At Valley Appraisal Services, we're masters at recognizing value trends in Edinburg, Hidalgo County, and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will usually cancel the PMI with little effort. 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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