Let PAYNE Appraisal, LLC help you discover if you can get rid of your PMI
When getting a mortgage, a 20% down payment is usually the standard. The lender's liability is usually only the difference between the home value and the sum due on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and natural value variations in the event a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the value of the home is less than what is owed on the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they acquire the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers avoid bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook ahead of time.
Considering it can take countless years to get to the point where the principal is only 20% of the initial loan amount, it's essential to know how your home has increased in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends predict decreasing home values, you should realize that real estate is local.
The difficult thing for most home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At PAYNE Appraisal, LLC, we know when property values have risen or declined. We're experts at recognizing value trends in , Tarrant County and surrounding areas. When faced with information from an appraiser, the mortgage company will often drop the PMI with little effort. At which 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: