Reliant Appraisals can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is common when purchasing a home. The lender's liability is usually only the difference between the home value and the amount due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value changes in the event a borrower defaults.
The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan takes care of the lender in case a borrower doesn't pay on the loan and the worth of the house is lower than the balance of the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible. It's money-making for the lender because they acquire the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers avoid paying 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. Wise home owners can get off the hook sooner than expected. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
Because it can take countless years to arrive at the point where the principal is just 20% of the original amount borrowed, it's essential to know how your home has grown in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be following the national trends and/or your home could have acquired equity before things calmed down, so even when nationwide trends hint at declining home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Reliant Appraisals, we know when property values have risen or declined. We're experts at recognizing value trends in San Antonio, Bexar County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: