LHC Appraisals can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when buying a house. Considering the liability for the lender is often only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value changeson the chance that a purchaser defaults.
Banks were working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower is unable to pay on the loan and the worth of the house is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. It's favorable for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, wise home owners can get off the hook sooner than expected.
Considering it can take many years to get to the point where the principal is only 20% of the original loan amount, it's necessary to know how your home has increased in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends signify falling home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have secured equity before things calmed down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is 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 determining value trends in Denton, Denton County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often drop the PMI with little trouble. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: