Have equity in your home? Want a lower payment? An appraisal from Driver & Associates Appraisal Services can help you get rid of your PMI.A 20% down payment is usually the standard when purchasing a home. The lender's only risk is usually just the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value changes in the event a purchaser defaults.During the recent mortgage boom of the mid 2000s, it became common to see lenders reducing down payments to 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. PMI takes care of the lender in the event a borrower defaults on the loan and the value of the house is less than the loan balance. PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the costs, PMI is advantageous for the lender because they secure the money, and they get the money if the borrower doesn't pay.
How can a home buyer keep from bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on most loans. Wise homeowners can get off the hook ahead of time. The law pledges that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.It can take a significant number of years to arrive at the point where the principal is just 80% of the original loan amount, so it's necessary to know how your Texas home has appreciated in value. After all, every bit of appreciation you've acquired over time counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not conform to national trends and/or your home could have gained equity before the economy simmered down. So even when nationwide trends signify a reduction in home values, you should realize that real estate is local. An accredited, Texas licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. It is an appraiser's job to understand the market dynamics of their area. At Driver & Associates Appraisal Services, we know when property values have risen or declined. We're masters at determining value trends in Forth Worth, Denton County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will often remove the PMI with little trouble. At which time, the home owner can delight in 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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