CFB Appraisal can help you remove your Private Mortgage InsuranceIt's typically inferred that a 20% down payment is common when getting a mortgage. The lender's risk is oftentimes only the remainder between the home value and the balance remaining on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value variations in the event a borrower doesn't pay.During the recent mortgage boom of the mid 2000s, it was widespread to see lenders only asking for down payments of 10, 5, 3 or often 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the market price of the home is lower than the loan balance. Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender absorbs all the costs, PMI is money-making for the lender because they secure the money, and they receive payment if the borrower doesn't pay.
How homebuyers can avoid paying PMIWith the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, wise home owners can get off the hook a little earlier.Since it can take a significant number of years to get to the point where the principal is just 80% of the original loan amount, it's crucial to know how your Texas home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood might not adhere to national trends and/or your home might have gained equity before things cooled off. So even when nationwide trends hint at decreasing home values, you should realize that real estate is local. The hardest thing for most homeowners to determine is whether their home equity has exceeded the 20% point. An accredited, Texas licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At CFB Appraisal, we're experts at determining value trends in San Antonio, Bexar 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 generally 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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