Dixon Appraisal Company, LLC can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is typically the standard. The lender's only risk is usually just the remainder between the home value and the sum due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and typical value variations in the event a borrower is unable to pay.During the recent mortgage boom of the last decade, it became customary to see lenders making deals with down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the value of the house is less than what the borrower still owes on the loan. Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's beneficial for the lender because they secure the money, and they get the money if the borrower doesn't pay, in contrast to a piggyback loan where the lender consumes all the costs.
How can a homeowner keep from bearing the expense of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on most loans. Savvy homeowners can get off the hook beforehand. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.Because it can take several years to arrive at the point where the principal is just 80% of the original amount of the loan, it's crucial to know how your Texas home has grown in value. After all, every bit of appreciation you've acquired over time counts towards abolishing 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 adhere to national trends and/or your home could have secured equity before the economy declined. So even when nationwide trends forecast declining home values, you should realize that real estate is local. A certified, Texas licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a difficult thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Dixon Appraisal Company, LLC, we know when property values have risen or declined. We're masters at analyzing value trends in MESQUITE, Dallas County, and surrounding areas. Faced with information from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that time, the homeowner 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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