Becky Walker Certified Appraiser can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is typically the standard. The lender's only liability is typically just the remainder between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and regular value changes on the chance that a borrower defaults.Lenders were working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the increased risk of the small down payment with Private Mortgage Insurance or PMI. This added plan takes care of the lender in the event a borrower is unable to pay on the loan and the market price of the home is lower than the loan balance. Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI can be expensive to a borrower. As opposed to a piggyback loan where the lender consumes all the losses, PMI is money-making for the lender because they acquire the money, and they are covered if the borrower doesn't pay.
How can homebuyers avoid paying PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, savvy home owners can get off the hook a little early.It can take a significant number of years to get to the point where the principal is just 80% of the original loan amount, so it's important to know how your Texas home has increased in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict decreasing home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have secured equity before things declined. The toughest thing for most consumers to figure out is just when their home's equity rises above the 20% point. An accredited, Texas licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Becky Walker Certified Appraiser, we know when property values have risen or declined. We're masters at determining value trends in Beaumont, Jefferson County, and surrounding areas. Faced with information from an appraiser, the mortgage company will often remove the PMI with little trouble. At that 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
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