Have equity in your home? Want a lower payment? An appraisal from Hemry Appraisal Services can help you get rid of your PMI.It's generally inferred that a 20% down payment is common when purchasing a home. Considering the liability for the lender is often only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and regular value changes in the event a borrower doesn't pay.During the recent mortgage boom of the mid 2000s, it was widespread to see lenders only asking for down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. This added policy covers the lender in case a borrower is unable to pay on the loan and the value of the home is lower than what the borrower still owes on the loan. PMI can be costly 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. As opposed to a piggyback loan where the lender takes in all the costs, PMI is advantageous for the lender because they obtain the money, and they receive payment if the borrower is unable to pay.
How can a buyer prevent paying PMI?The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy homeowners can get off the hook sooner than expected. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.Considering it can take several years to reach the point where the principal is only 80% of the original loan amount, it's important to know how your Texas home has appreciated in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not follow national trends and/or your home could have gained equity before things declined. So even when nationwide trends indicate decreasing home values, you should realize that real estate is local. A certified, Texas licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Hemry Appraisal Services, we know when property values have risen or declined. We're masters at identifying value trends in Lewisville, Denton County, and surrounding areas. Faced with information from an appraiser, the mortgage company will generally cancel the PMI with little effort. At that time, the homeowner can enjoy 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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