Have equity in your home? Want a lower payment? An appraisal from Bullseye Valuation Group can help you get rid of your PMI.
A 20% down payment is typically accepted when buying a house. Considering the risk for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuationsin the event a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the worth of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's lucrative for the lender because they collect the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer refrain from paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, acute home owners can get off the hook a little early.
Because it can take many years to reach the point where the principal is only 20% of the original loan amount, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've acquired over the years 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 be minding the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends hint at declining home values, you should understand that real estate is local.
The difficult thing for almost all homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Bullseye Valuation Group, we're experts at determining value trends in AUSTIN, Travis County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often drop the PMI with little trouble. 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: