Have equity in your home? Want a lower payment? An appraisal from Metroplex Appraisal Services, LLC can help you get rid of your PMI.It's largely known that a 20% down payment is accepted when buying a house. Because the liability for the lender is often only the difference between the home value and the amount due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value variations on the chance that a borrower is unable to pay.
The market was accepting down payments dropping to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the value of the home is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI is costly to a borrower. Instead of a piggyback loan where the lender consumes all the costs, PMI is beneficial for the lender because they secure the money, and they receive payment if the borrower doesn't pay.
How can a homeowner keep from bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on most loans. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook a little earlier.
It can take several years to reach the point where the principal is only 80% of the original amount of the loan, so it's crucial to know how your Texas home has appreciated in value. After all, every bit of appreciation you've accomplished 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 conform to national trends and/or your home could have secured equity before the economy cooled off. So even when nationwide trends signify decreasing home values, you should know most importantly that real estate is local.
An accredited, Texas licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Metroplex Appraisal Services, LLC, we're experts at analyzing value trends in Carrollton, Denton County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: