Let MacDonald Residential Appraisal help you determine if you can eliminate your PMIIt's typically understood that a 20% down payment is accepted when buying a house. Since the liability for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuations on the chance that a borrower doesn't pay.The market was working with down payments discounted to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added plan covers the lender in the event a borrower doesn't pay on the loan and the value of the home is lower than the loan balance. Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they acquire the money, and they get the money if the borrower defaults, unlike a piggyback loan where the lender absorbs all the costs.
How can a homebuyer avoid bearing the cost of PMI?The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Smart home owners can get off the hook sooner than expected. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.Since it can take many years to reach the point where the principal is only 80% of the original amount of the loan, it's crucial to know how your Texas home has grown in value. After all, every bit of appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home could have gained equity before the economy simmered down. So even when nationwide trends signify a reduction in 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 difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At MacDonald Residential Appraisal, we're masters at pinpointing value trends in Dallas, Dallas County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually remove the PMI with little trouble. 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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