Aztec Appraisals, LLC can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is typically the standard. The lender's only liability is often just the remainder between the home value and the sum due on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and natural value variations on the chance that a purchaser is unable to pay.During the mortgage boom of the mid 2000s, it was customary to see lenders reducing down payments to 10, 5, 3 or sometimes 0 percent. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy covers the lender if a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan. PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. Instead of a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they collect the money, and they receive payment if the borrower is unable to pay.
How can home owners keep from paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise home owners can get off the hook a little earlier. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.It can take several years to get to the point where the principal is just 80% of the initial amount of the loan, so it's necessary to know how your Texas home has increased in value. After all, any appreciation you've achieved over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify lower overall home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have secured equity before things simmered down. A certified, Texas licensed real estate appraiser can help home owners 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 keep up with the market dynamics of their area. At Aztec Appraisals, LLC, we're masters at pinpointing value trends in Houston, Harris County, and surrounding areas, and we know when property values have risen or declined. When 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 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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