Have equity in your home? Want a lower payment? An appraisal from Reliant Appraisals can help you get rid of your PMI.
It's typically inferred that a 20% down payment is common when buying a house. Considering the risk for the lender is usually only the difference between the home value and the amount due on the loan, the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and regular value variationson the chance that a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the value of the house is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender absorbs all the damages, PMI is beneficial for the lender because they acquire the money, and they receive payment 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 a buyer prevent bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Wise homeowners can get off the hook a little early. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Since it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has increased in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends predict plunging home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to know the market dynamics of their area. At Reliant Appraisals, we're experts at recognizing value trends in San Antonio, Bexar County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often remove the PMI with little trouble. At which 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: