Clearfork Appraisals can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when buying a house. The lender's liability is generally only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuations in the event a borrower doesn't pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the value of the house is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they secure the money, and they receive payment if the borrower doesn't pay, opposite from a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer refrain from bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, wise home owners can get off the hook a little early.
Because it can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, it's essential to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends hint at declining home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Clearfork Appraisals, we're masters at pinpointing value trends in Fort Worth, Tarrant County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: