Have equity in your home? Want a lower payment? An appraisal from Waldron Appraisal LLC can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. The lender's liability is generally only the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy guards the lender in the event a borrower is unable to pay on the loan and the worth of the property is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender absorbs all the deficits, PMI is favorable for the lender because they secure the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner avoid paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, acute home owners can get off the hook a little earlier.
Since it can take countless years to reach the point where the principal is just 20% of the original loan amount, it's necessary to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends indicate plummeting home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things settled down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Waldron Appraisal LLC, we're experts at pinpointing value trends in Dallas, Dallas County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: