Have equity in your home? Want a lower payment? An appraisal from Dempsey, Cooper & Lane, LLC can help you get rid of your PMI.It's largely understood that a 20% down payment is the standard when purchasing a home. Considering the liability for the lender is often only the remainder between the home value and the sum due on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and typical value variations on the chance that a purchaser doesn't pay.
During the recent mortgage upturn that our country recently experienced, it became common to see lenders making deals with down payments of 10, 5, 3 or sometimes 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the value of the property is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they acquire the money, and they get the money if the borrower defaults, as opposed to a piggyback loan where the lender takes in all the costs.
How can buyers prevent bearing the expense of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on most loans. Wise homeowners can get off the hook sooner than expected. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take several years to reach the point where the principal is only 80% of the initial amount of the loan, so it's essential to know how your Texas home has grown in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends forecast lower overall home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things simmered down.
An accredited, 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 difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Dempsey, Cooper & Lane, LLC, we know when property values have risen or declined. We're experts at identifying value trends in El Paso, El Paso County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually remove the PMI with little trouble. At which 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: