Reliant Appraisals can help you remove your Private Mortgage Insurance
It's generally understood that a 20% down payment is accepted when buying a house. Because the risk for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value variationsin the event a borrower defaults.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added policy guards the lender in case a borrower is unable to pay on the loan and the value of the property is less than the loan balance.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is money-making for the lender because they obtain the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers prevent bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook ahead of time.
Because it can take countless 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 grown in value. After all, every bit of appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home might have acquired equity before things simmered down, so even when nationwide trends predict decreasing home values, you should understand that real estate is local.
The hardest thing for almost all home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to know the market dynamics of their area. At Reliant Appraisals, we know when property values have risen or declined. We're masters at recognizing value trends in San Antonio, Bexar County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little effort. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: