Chris Leister Appraisals, LLC can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is usually the standard. The lender's only exposure is often just the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and natural value variations on the chance that a purchaser is unable to pay.The market was taking down payments dropping to 10, 5 and frequently 0 percent during the mortgage boom of the last decade. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy guards the lender in case a borrower is unable to pay on the loan and the market price of the house is less than what the borrower still owes on the loan. PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. As opposed to a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they collect the money, and they get the money if the borrower defaults.
How can home buyers avoid paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart homeowners can get off the hook a little earlier. The law states that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.It can take several years to reach the point where the principal is only 80% of the original amount borrowed, so it's necessary to know how your Texas home has appreciated in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends forecast declining home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things cooled off. An accredited, Texas licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Chris Leister Appraisals, LLC, we're experts at determining value trends in Richardson, Dallas County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally drop the PMI with little anxiety. At which time, the home owner 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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