Have equity in your home? Want a lower payment? An appraisal from Tasador, Inc can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. The lender's risk is generally only the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan protects the lender in the event a borrower defaults on the loan and the market price of the property is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI can be costly to a borrower. Contradictory to a piggyback loan where the lender consumes all the costs, PMI is lucrative for the lender because they collect the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute home owners can get off the hook a little early. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
Considering it can take many years to reach the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends forecast declining home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have acquired equity before things simmered down.
An accredited, 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. It's an appraiser's job to recognize the market dynamics of their area. At Tasador, Inc, we know when property values have risen or declined. We're masters at determining value trends in Corpus Christi, Nueces County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often remove 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: