Brazos Valley Appraisals can help you remove your Private Mortgage InsuranceIt's widely understood that a 20% down payment is accepted when buying a house. Considering the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value changes on the chance that a purchaser defaults.
During the recent mortgage boom that our country recently experienced, it became common to see lenders reducing down payments to 10, 5, 3 or sometimes 0 percent. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. Instead of a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower is unable to pay.
How homeowners can prevent paying PMIAs a result of The Homeowners Protection Act of 1998, lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. The law pledges that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little early.
Considering it can take a significant number of years to reach the point where the principal is just 80% of the original amount borrowed, it's necessary to know how your Texas home has increased in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not follow national trends and/or your home might have secured equity before the economy simmered down. So even when nationwide trends indicate falling home values, you should know most importantly that real estate is local.
The toughest thing for many people to determine is whether their home equity has exceeded the 20% point. A certified, Texas licensed real estate appraiser can definitely help. It's an appraiser's job to recognize the market dynamics of their area. At Brazos Valley Appraisals, we're masters at recognizing value trends in College Station, Brazos County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally drop the PMI with little anxiety. At that 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: