Curiel Appraisal Service can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is usually the standard. Since the liability for the lender is oftentimes only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders only asking for down payments of 10, 5 or sometimes 0 percent. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan covers the lender in case a borrower defaults on the loan and the market price of the house is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. As opposed to a piggyback loan where the lender consumes all the deficits, PMI is beneficial for the lender because they collect the money, and they get the money if the borrower is unable to pay.
How can home owners prevent bearing the expense of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on nearly all loans. The law states that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, acute homeowners can get off the hook a little earlier.
Considering it can take many years to reach the point where the principal is just 80% of the original amount of the loan, it's essential to know how your Texas home has grown in value. After all, any appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not adhere to national trends and/or your home might have gained equity before the economy simmered down. So even when nationwide trends predict decreasing home values, you should know most importantly that real estate is local.
The difficult thing for many homeowners to figure out is just when their home's equity goes over the 20% point. An accredited, Texas licensed real estate appraiser can surely help. It is an appraiser's job to know the market dynamics of their area. At Curiel Appraisal Service, we know when property values have risen or declined. We're masters at analyzing value trends in El Paso, El Paso County, and surrounding areas. When faced with data from an appraiser, the mortgage company will usually do away with the PMI with little trouble. At which 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: