Taylor Sturgis can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is usually the standard. Since the risk for the lender is generally only the difference between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser doesn't pay.During the recent mortgage boom of the last decade, it was widespread to see lenders reducing down payments to 10, 5, 3 or often 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower than the loan balance. PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. It's money-making for the lender because they secure the money, and they are covered if the borrower defaults, separate from a piggyback loan where the lender takes in all the deficits.
How home owners can refrain from bearing the cost of PMIWith the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on nearly all loans. Wise home owners can get off the hook a little earlier. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.Considering it can take a significant number of years to arrive at the point where the principal is only 80% of the initial amount borrowed, it's important to know how your Texas home has increased in value. After all, all of the appreciation you've accomplished over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home might have secured equity before things simmered down. The toughest thing for many people to figure out is whether their home equity has exceeded the 20% point. An accredited, Texas licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Taylor Sturgis, we know when property values have risen or declined. We're masters at determining value trends in Fort Worth, Taylor County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At which 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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