Let MJR Residential help you learn if you can eliminate your PMIA 20% down payment is usually the standard when getting a mortgage. Considering the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value changes in the event a purchaser doesn't pay.During the recent mortgage boom of the last decade, it became customary to see lenders only asking for down payments of 10, 5 or sometimes 0 percent. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards 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 pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and on many occasions isn't even tax deductible. Different from a piggyback loan where the lender consumes all the costs, PMI is advantageous for the lender because they acquire the money, and they are covered if the borrower doesn't pay.
How home buyers can refrain from paying PMIAs a result of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, acute home owners can get off the hook a little earlier.It can take a significant number of years to reach the point where the principal is only 80% of the original 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 obtained over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not adhere to national trends and/or your home could have gained equity before the economy declined. So even when nationwide trends signify decreasing home values, you should realize that real estate is local. A certified, 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 tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At MJR Residential, we know when property values have risen or declined. We're masters at analyzing value trends in Houston, Harris County, and surrounding areas. When faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At which time, the homeowner can enjoy 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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