Have equity in your home? Want a lower payment? An appraisal from Russell Appraisal Service can help you get rid of your PMI.
When buying a house, a 20% down payment is typically the standard. Since the risk for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value variationson the chance that a borrower defaults.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional plan takes care of the lender in case a borrower defaults on the loan and the market price of the property is less than the balance of the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender consumes all the losses, PMI is beneficial for the lender because they obtain the money, and they get paid 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 a homeowner avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy homeowners can get off the hook a little early. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends forecast plunging home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have acquired equity before things settled 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 tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Russell Appraisal Service, we're experts at determining value trends in Pflugerville, Travis County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often drop the PMI with little trouble. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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