Have equity in your home? Want a lower payment? An appraisal from Kunz Appraisals can help you get rid of your PMI.It's widely inferred that a 20% down payment is accepted when getting a mortgage. Considering the risk for the lender is generally only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value changes on the chance that a purchaser defaults.During the recent mortgage upturn of the mid 2000s, it became customary to see lenders reducing down payments to 10, 5, 3 or even 0 percent. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower defaults on the loan and the value of the home is less than the balance of the loan. PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. It's advantageous for the lender because they secure the money, and they are covered if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the deficits.
How can homebuyers keep from bearing the expense of PMI?The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, savvy home owners can get off the hook sooner than expected.Since it can take several years to get to the point where the principal is just 80% of the original amount borrowed, it's crucial to know how your Texas home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends forecast lower overall home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have secured equity before things simmered down. A certified, Texas licensed real estate appraiser can help home owners figure out if their equity has made it to the 20% point, as it's a hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At Kunz Appraisals, we know when property values have risen or declined. We're experts at determining value trends in East Bernard, Wharton County, and surrounding areas. Faced with data from an appraiser, the mortgage company will most often drop the PMI with little effort. At that time, the home owner can retain 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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