Mindi Kitten Appraisals can help you remove your Private Mortgage InsuranceIt's widely known that a 20% down payment is common when buying a house. Because the liability for the lender is often only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value fluctuations in the event a purchaser defaults.
The market was working with down payments as low as 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy takes care of the lender in case a borrower is unable to pay on the loan and the market price of the house is less than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the deficits, PMI is advantageous for the lender because they collect the money, and they receive payment if the borrower defaults.
How can a buyer refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute home owners can get off the hook sooner than expected. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to get to the point where the principal is only 80% of the original amount of the loan, so it's necessary to know how your Texas home has increased in value. After all, any appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not conform to national trends and/or your home could have secured equity before the economy cooled off. So even when nationwide trends hint at decreasing home values, you should understand that real estate is local.
An accredited, Texas licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Mindi Kitten Appraisals, we know when property values have risen or declined. We're experts at pinpointing value trends in Lubbock, Lubbock County, and surrounding areas. When faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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