Coleman Appraisal can help you remove your Private Mortgage InsuranceA 20% down payment is typically the standard when buying a house. Considering the liability for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations in the event a borrower doesn't pay.Lenders were accepting down payments dropping to 10, 5 and frequently 0 percent during the mortgage boom of the last decade. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the market price of the home is lower than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. Different from a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they secure the money, and they get paid if the borrower is unable to pay.
How home owners can avoid bearing the expense of PMIThe Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, acute home owners can get off the hook sooner than expected.It can take many years to get to the point where the principal is only 80% of the original amount of the loan, so it's important to know how your Texas home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends hint at falling home values, be aware that real estate is local. Your neighborhood may not be adhering to 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 reached the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Coleman Appraisal, we know when property values have risen or declined. We're masters at determining value trends in Allen, Collin County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally drop the PMI with little trouble. 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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