Cheryl Clark can help you remove your Private Mortgage InsuranceA 20% down payment is typically the standard when purchasing a home. Since the liability for the lender is generally only the difference between the home value and the sum due on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value changes in the event a purchaser is unable to pay.Banks were accepting down payments discounted to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the market price of the home is less than what is owed on the loan. PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the losses, PMI is profitable for the lender because they acquire the money, and they get the money if the borrower doesn't pay.
How homeowners can refrain from paying PMIWith the passage of The Homeowners Protection Act of 1998, lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on nearly all loans. Smart homeowners can get off the hook beforehand. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.Because it can take many years to get to the point where the principal is just 80% of the original amount of the loan, it's necessary to know how your Texas home has appreciated in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends signify lower overall home values, be aware that real estate is local. Your neighborhood may not be minding 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 just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to know the market dynamics of their area. At Cheryl Clark, we know when property values have risen or declined. We're experts at identifying value trends in Eastland, Eastland County, and surrounding areas. When faced with information from an appraiser, the mortgage company will most often remove the PMI with little effort. 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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