Let LHC Appraisals help you discover if you can eliminate your PMI
A 20% down payment is typically accepted when purchasing a home. The lender's risk is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value variations on the chance that a borrower defaults.
The market was taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary policy covers the lender in the event a borrower doesn't pay on the loan and the market price of the home is less than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the damages, PMI is advantageous for the lender because they obtain the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Acute home owners can get off the hook a little early. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, so it's important to know how your home has grown in value. After all, any appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends predict falling home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At LHC Appraisals, we're experts at determining value trends in Denton, Denton County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: