Clearfork Appraisals can help you remove your Private Mortgage Insurance
It's typically understood that a 20% down payment is the standard when getting a mortgage. Since the liability for the lender is generally only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and regular value changeson the chance that a purchaser defaults.
During the recent mortgage upturn of the last decade, it became common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan takes care of the lender in the event a borrower defaults on the loan and the market price of the home is less than the balance of the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible. It's money-making for the lender because they acquire the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer avoid bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise home owners can get off the hook ahead of time. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
It can take many years to get to the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has grown in value. After all, any appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends signify falling home values, realize that real estate is local. Your neighborhood might not be minding the national trends and/or your home could have secured equity before things settled down.
The difficult thing for most homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to know the market dynamics of their area. At Clearfork Appraisals, we know when property values have risen or declined. We're experts at analyzing value trends in Fort Worth, Tarrant County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually remove the PMI with little effort. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: