B & B Valuations, LLC can help you remove your Private Mortgage Insurance

When getting a mortgage, a 20% down payment is typically the standard. Because the liability for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value changeson the chance that a purchaser doesn't pay.

The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of 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.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI can be costly to a borrower. It's beneficial for the lender because they acquire the money, and they get paid if the borrower is unable to pay, different from a piggyback loan where the lender consumes all the damages.

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

How homeowners can refrain from paying PMI

With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, smart home owners can get off the hook a little early.

It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has grown in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends predict plummeting home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have acquired equity before things cooled off.

The hardest thing for most homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to know the market dynamics of their area. At B & B Valuations, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Katy, Fort Bend County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often cancel 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