Have equity in your home? Want a lower payment? An appraisal from LHC Appraisals can help you get rid of your PMI.
It's typically inferred that a 20% down payment is accepted when getting a mortgage. Since the risk for the lender is often only the difference between the home value and the sum due on the loan, the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and natural value variationson the chance that a purchaser is unable to pay.
Banks were accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the worth of the house is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's beneficial for the lender because they collect the money, and they get the money if the borrower doesn't pay, contradictory to a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer prevent bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise homeowners can get off the hook a little earlier. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
Since it can take countless years to get to the point where the principal is just 20% of the original amount borrowed, it's necessary to know how your home has grown in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be minding the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends hint at decreasing home values, you should realize that real estate is local.
The toughest thing for many home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At LHC Appraisals, we know when property values have risen or declined. We're experts at pinpointing value trends in Denton, Denton County and surrounding areas. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little effort. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: