Have equity in your home? Want a lower payment? An appraisal from Peter Shriver can help you get rid of your PMI.A 20% down payment is typically accepted when purchasing a home. The lender's only liability is often just the difference between the home value and the balance outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser is unable to pay.Lenders were working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender if a borrower defaults on the loan and the market price of the property is less than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower defaults, as opposed to a piggyback loan where the lender takes in all the losses.
How can buyers keep from bearing the expense of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on most loans. Smart home owners can get off the hook a little earlier. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.It can take many years to get to the point where the principal is just 80% of the initial amount borrowed, so it's necessary to know how your Texas home has grown in value. After all, all of the appreciation you've acquired over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends hint at declining home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things cooled off. The hardest thing for most homeowners to figure out is whether their home equity has exceeded the 20% point. A certified, Texas licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Peter Shriver, we're masters at pinpointing value trends in Dallas, Dallas County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that time, the home owner can relish 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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