Greater Houston Appraisal Group, Inc. can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is usually the standard. Since the risk for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value fluctuations on the chance that a purchaser doesn't pay.During the recent mortgage boom that our country recently experienced, it became customary to see lenders making deals with down payments of 10, 5 or sometimes 0 percent. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the market price of the home is lower than the loan balance. PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. As opposed to a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower is unable to pay.
How can a home owner keep from bearing the expense of PMI?The Homeowners Protection Act of 1998 requires the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute homeowners can get off the hook a little earlier. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.Because it can take many years to arrive at the point where the principal is only 80% of the original amount borrowed, it's essential to know how your Texas home has appreciated in value. After all, all of the appreciation you've achieved over the years 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 may not conform to national trends and/or your home could have gained equity before things declined. So even when nationwide trends hint at declining home values, you should understand that real estate is local. The toughest thing for almost all people to determine is whether their home equity has exceeded the 20% point. A certified, Texas licensed real estate appraiser can certainly help. It's an appraiser's job to recognize the market dynamics of their area. At Greater Houston Appraisal Group, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Houston, Harris County, and surrounding areas. Faced with data from an appraiser, the mortgage company will generally eliminate 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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