ExactAppraise, Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when buying a house. The lender's risk is usually only the difference between the home value and the sum due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and typical value changes on the chance that a purchaser is unable to pay.
The market was working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the value of the house is less than the loan balance.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. It's money-making for the lender because they secure the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart homeowners can get off the hook sooner than expected. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take countless years to get to the point where the principal is only 20% of the original amount borrowed, so it's important to know how your home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home could have secured equity before things calmed down, so even when nationwide trends forecast plunging home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand 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 keep up with the market dynamics of their area. At ExactAppraise, Inc., we're experts at determining value trends in Dallas, Dallas County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually drop the PMI with little trouble. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: