Have equity in your home? Want a lower payment? An appraisal from Garrison Appraisal Service can help you get rid of your PMI.It's typically inferred that a 20% down payment is accepted when getting a mortgage. Because the risk for the lender is oftentimes only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and typical value fluctuations on the chance that a purchaser doesn't pay.During the recent mortgage boom of the last decade, it became customary to see lenders making deals with down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the value of the home is less than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender absorbs all the deficits, PMI is money-making for the lender because they secure the money, and they are covered if the borrower is unable to pay.
How can a home owner keep from paying PMI?The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen home owners can get off the hook a little earlier. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.It can take a significant number of years to get to the point where the principal is only 80% of the initial amount of the loan, so it's necessary to know how your Texas home has grown in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify lower overall home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have gained equity before things cooled off. An accredited, Texas licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to know the market dynamics of their area. At Garrison Appraisal Service, we're masters at recognizing value trends in Plano, Collin County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
|
||||||||||||||||||
