Have equity in your home? Want a lower payment? An appraisal from Clarity Appraisals can help you get rid of your PMI.It's largely understood that a 20% down payment is accepted when buying a house. The lender's liability is generally only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and natural value fluctuations in the event a borrower doesn't pay.During the recent mortgage upturn that our country recently experienced, it became common to see lenders only asking for down payments of 10, 5, 3 or sometimes 0 percent. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the value of the house is lower 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 frequently isn't even tax deductible. Instead of a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they obtain the money, and they are covered if the borrower defaults.
How home owners can avoid paying PMIAs a result of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on most loans. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute home owners can get off the hook a little early.It can take many years to get to the point where the principal is just 80% of the original amount borrowed, so it's important to know how your Texas home has appreciated in value. After all, all of the appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not adhere to national trends and/or your home could have secured equity before things cooled off. So even when nationwide trends indicate falling home values, you should know most importantly that real estate is local. A certified, Texas licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Clarity Appraisals, we know when property values have risen or declined. We're masters at recognizing value trends in Austin, Travis County, and surrounding areas. Faced with data from an appraiser, the mortgage company will generally do away with the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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