Let Harper & Strickland, Inc. help you learn if you can get rid of your PMI

When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value variations in the event a purchaser is unable to pay.

The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the worth of the house is lower than the loan balance.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's lucrative for the lender because they obtain the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the costs.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How can a home owner keep from bearing the cost of PMI?

The Homeowners Protection Act of 1998 makes 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. Acute home owners can get off the hook a little early. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.

Since it can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends signify declining home values, you should understand that real estate is local.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Harper & Strickland, Inc., we know when property values have risen or declined. We're experts at determining value trends in Fairview, Collin County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At which 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