Let Appraisal Specialists help you determine if you can cancel your PMIIt's typically understood that a 20% down payment is accepted when buying a house. Since the risk for the lender is oftentimes only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and typical value variations on the chance that a purchaser is unable to pay.
During the recent mortgage upturn that our country recently experienced, it was customary to see lenders reducing down payments to 10, 5, 3 or often 0 percent. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the property is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI can be pricey to a borrower. It's profitable for the lender because they secure the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender consumes all the deficits.
How can homebuyers prevent paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Savvy homeowners can get off the hook ahead of time. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Because it can take several years to arrive at the point where the principal is only 80% of the original amount borrowed, it's essential to know how your Texas home has increased in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not conform to national trends and/or your home might have secured equity before the economy declined. So even when nationwide trends signify falling home values, you should know most importantly that real estate is local.
An accredited, Texas licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Appraisal Specialists, we know when property values have risen or declined. We're masters at identifying value trends in Amarillo, Randall County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At which time, the home owner can relish the savings from that point on.
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