Let TEXAS REAL ESTATE APPRAISERS help you learn if you can eliminate your PMIIt's widely known that a 20% down payment is typically what is accepted when buying a house. The lender's liability is oftentimes only the remainder between the home value and the balance due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value changes in the event a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders making deals with down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional plan covers 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 lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. Different from a piggyback loan where the lender consumes all the deficits, PMI is favorable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay.
How homebuyers can prevent bearing the cost of PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on most loans. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, acute homeowners can get off the hook sooner than expected.
Since it can take a significant number of years to get to the point where the principal is just 80% of the original loan amount, it's crucial to know how your Texas home has grown in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not adhere to national trends and/or your home may have secured equity before things declined. So even when nationwide trends predict a reduction in home values, you should understand that real estate is local.
An accredited, Texas licensed real estate appraiser can help home owners figure out if their equity has exceeed 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 TEXAS REAL ESTATE APPRAISERS, we know when property values have risen or declined. We're experts at recognizing value trends in Keene, Johnson County, and surrounding areas. Faced with data from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that time, the home owner can relish the savings from that point on.
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