Motto Appraisal Service can help you remove your Private Mortgage InsuranceIt's generally understood that a 20% down payment is common when getting a mortgage. The lender's only exposure is generally just the remainder between the home value and the balance due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser defaults.During the recent mortgage upturn of the mid 2000s, it became customary to see lenders making deals with down payments of 10, 5 or often 0 percent. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the value of the property is lower than the balance of the loan. Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. Separate from a piggyback loan where the lender consumes all the damages, PMI is favorable for the lender because they acquire the money, and they receive payment if the borrower doesn't pay.
How can a homebuyer avoid paying PMI?The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, acute homeowners can get off the hook sooner than expected.Since it can take many years to arrive at the point where the principal is just 80% of the initial amount of the loan, it's essential to know how your Texas home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not conform to national trends and/or your home may have gained equity before the economy simmered down. So even when nationwide trends signify falling home values, you should know most importantly that real estate is local. The difficult thing for almost all homeowners to determine is whether their home equity has exceeded the 20% point. A certified, Texas licensed real estate appraiser can definitely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Motto Appraisal Service, we know when property values have risen or declined. We're masters at recognizing value trends in Trophy Club, Denton County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At that time, the homeowner can delight in 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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