Let Lone Star Appraisals help you figure out if you can eliminate your PMIA 20% down payment is usually the standard when buying a house. The lender's liability is generally only the remainder between the home value and the balance outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value variations in the event a purchaser is unable to pay.During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders reducing down payments to 10, 5 or even 0 percent. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender in case a borrower doesn't pay on the loan and the market price of the property is lower than what the borrower still owes on the loan. PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. It's lucrative for the lender because they collect the money, and they are covered if the borrower defaults, unlike a piggyback loan where the lender absorbs all the damages.
How can homeowners keep from bearing the expense of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on most loans. Keen homeowners can get off the hook ahead of time. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.It can take many years to reach the point where the principal is just 80% of the original amount of the loan, so it's important to know how your Texas home has grown in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not follow national trends and/or your home may have gained equity before things simmered down. So even when nationwide trends forecast a reduction in home values, you should understand that real estate is local. A certified, Texas licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At Lone Star Appraisals, we know when property values have risen or declined. We're masters at identifying value trends in Midland, Midland County, and surrounding areas. Faced with information from an appraiser, the mortgage company will most often do away with the PMI with little trouble. 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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