Have equity in your home? Want a lower payment? An appraisal from REV (REAL ESTATE VALUATION) can help you get rid of your PMI.A 20% down payment is usually the standard when buying a house. Considering the risk for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and natural value changes on the chance that a borrower is unable to pay.Banks were accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the value of the property is less than what the borrower still owes on the loan. PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. It's lucrative for the lender because they collect the money, and they get the money if the borrower defaults, in contrast to a piggyback loan where the lender absorbs all the costs.
How can a homebuyer keep from bearing the cost of PMI?As a result of The Homeowners Protection Act of 1998, lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount on most loans. Savvy home owners can get off the hook sooner than expected. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.Considering it can take several years to reach the point where the principal is only 80% of the original amount borrowed, it's essential to know how your Texas home has appreciated in value. After all, all of the appreciation you've acquired over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not conform to national trends and/or your home may have gained equity before things simmered down. So even when nationwide trends hint at falling home values, you should realize that real estate is local. A certified, Texas licensed real estate appraiser can help homeowners figure out if their equity has made it to the 20% point, as it's a difficult thing to know. It is an appraiser's job to know the market dynamics of their area. At REV (REAL ESTATE VALUATION), we're masters at analyzing value trends in Victoria, Victoria 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 cancel the PMI with little anxiety. At that 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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