Hackney Appraisal Service can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is usually the standard. The lender's liability is often only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and typical value variations in the event a borrower doesn't pay.
The market was taking down payments dropping to 10, 5 and frequently 0 percent during the mortgage boom of the last decade. A lender is able to handle the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than the balance of the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. As opposed to a piggyback loan where the lender consumes all the losses, PMI is lucrative for the lender because they obtain the money, and they get paid if the borrower defaults.
How can home owners prevent bearing the cost of PMI?The Homeowners Protection Act of 1998 requires the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law states that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook ahead of time.
It can take a significant number of years to get to the point where the principal is only 80% of the original loan amount, so it's essential to know how your Texas home has increased in value. After all, any appreciation you've accomplished over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not follow national trends and/or your home could have acquired equity before things simmered down. So even when nationwide trends signify decreasing home values, you should know most importantly that real estate is local.
An accredited, Texas licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Hackney Appraisal Service, we know when property values have risen or declined. We're masters at identifying value trends in Lubbock, Lubbock County, and surrounding areas. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little trouble. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: