Let Russell Appraisal Service help you figure out if you can eliminate your PMI
When getting a mortgage, a 20% down payment is usually the standard. The lender's risk is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuations in the event a borrower defaults.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender in the event a borrower is unable to pay on the loan and the worth of the property is less 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 often isn't even tax deductible, PMI can be costly to a borrower. Opposite from a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they secure the money, and they get paid 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 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 reaches 78 percent of the initial loan amount. Acute homeowners can get off the hook ahead of time. The law designates that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take many years to reach the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has grown in value. After all, all of the appreciation you've obtained over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends predict plummeting home values, you should understand that real estate is local.
The toughest thing for many home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Russell Appraisal Service, we know when property values have risen or declined. We're masters at analyzing value trends in Pflugerville, Travis County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At which 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:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.