Have equity in your home? Want a lower payment? An appraisal from Reliant Appraisals can help you get rid of your PMI.
A 20% down payment is typically the standard when getting a mortgage. The lender's liability is generally only the difference between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuations in the event a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy covers the lender if a borrower defaults on the loan and the market price of the property is less than what is owed on the loan.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can refrain from bearing the expense of PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart home owners can get off the hook a little early.
Because it can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's important to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends signify plummeting home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have gained equity before things calmed down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to know the market dynamics of their area. At Reliant Appraisals, we're experts at determining value trends in San Antonio, Bexar County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little effort. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: