Laura V Stehling Appraisals can help you remove your Private Mortgage InsuranceA 20% down payment is usually the standard when getting a mortgage. Because the risk for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value changes on the chance that a borrower defaults.During the recent mortgage boom of the mid 2000s, it became common to see lenders reducing down payments to 10, 5 or often 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the market price of the house is less than the balance of the loan. Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. It's lucrative for the lender because they obtain the money, and they receive payment if the borrower defaults, as opposed to a piggyback loan where the lender consumes all the deficits.
How homebuyers can avoid paying PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. Smart home owners can get off the hook sooner than expected. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.It can take many years to arrive at the point where the principal is only 80% of the initial loan amount, so it's important to know how your Texas home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood might not conform to national trends and/or your home may have gained equity before things simmered down. So even when nationwide trends predict falling home values, you should realize that real estate is local. The toughest thing for most consumers to determine is just when their home's equity goes over the 20% point. A certified, Texas licensed real estate appraiser can definitely help. It is an appraiser's job to recognize the market dynamics of their area. At Laura V Stehling Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in Victoria, Victoria County, and surrounding areas. Faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At which time, the homeowner 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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