Have equity in your home? Want a lower payment? An appraisal from Richey Appraisals can help you get rid of your PMI.It's typically inferred that a 20% down payment is common when buying a house. Since the risk for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuations in the event a borrower doesn't pay.During the recent mortgage boom of the mid 2000s, it became customary to see lenders making deals with down payments of 10, 5, 3 or often 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the value of the property is less than what is owed on the loan. Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. Different from a piggyback loan where the lender absorbs all the deficits, PMI is favorable for the lender because they acquire the money, and they get paid if the borrower defaults.
How can buyers keep from bearing the cost of PMI?The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy home owners can get off the hook sooner than expected.Since it can take a significant number of years to arrive at the point where the principal is only 80% of the initial loan amount, it's important to know how your Texas home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not follow national trends and/or your home may have acquired equity before the economy cooled off. So even when nationwide trends predict decreasing home values, you should understand that real estate is local. A certified, Texas licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Richey Appraisals, we know when property values have risen or declined. We're experts at identifying value trends in Texarkana, Bowie County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually do away with 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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