Have equity in your home? Want a lower payment? An appraisal from LHC Appraisals can help you get rid of your PMI.
It's widely inferred that a 20% down payment is accepted when getting a mortgage. The lender's liability is often only the difference between the home value and the amount due on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value variations in the event a borrower is unable to pay.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy takes care of the lender if 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 lumped into the mortgage payment and frequently isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they collect the money, and they receive payment if the borrower is unable to pay, contradictory to a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can refrain from bearing the expense of PMI
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Acute homeowners can get off the hook ahead of time. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the original loan amount, so it's essential to know how your home has grown in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends signify declining home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have secured equity before things cooled off.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At LHC Appraisals, we're masters at recognizing value trends in Denton, Denton County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often remove the PMI with little trouble. At that 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: