Allegiance Appraisals can help you remove your Private Mortgage InsuranceA 20% down payment is usually accepted when getting a mortgage. The lender's only liability is usually just the difference between the home value and the sum due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and typical value changes on the chance that a borrower doesn't pay.
The market was accepting down payments discounted to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the value of the house is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. Instead of a piggyback loan where the lender absorbs all the losses, PMI is advantageous for the lender because they acquire the money, and they are covered if the borrower doesn't pay.
How homeowners can refrain from bearing the cost of PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount on nearly all loans. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, wise home owners can get off the hook a little early.
Considering it can take many years to reach the point where the principal is only 80% of the initial loan amount, it's important to know how your Texas home has appreciated in value. After all, any appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends indicate lower overall 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 declined.
An accredited, Texas licensed real estate appraiser can help home owners figure out if their equity has made it to the 20% point, as it's a difficult thing to know. It's an appraiser's job to know the market dynamics of their area. At Allegiance Appraisals, we know when property values have risen or declined. We're experts at identifying value trends in Hitchcock, Galveston County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will often cancel the PMI with little effort. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: