MCA Inc. can help you remove your Private Mortgage InsuranceIt's generally known that a 20% down payment is accepted when getting a mortgage. The lender's risk is generally only the remainder between the home value and the balance due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower doesn't pay.Banks were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the value of the property is less than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and on many occasions isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they secure the money, and they are covered if the borrower doesn't pay.
How can home owners keep from bearing the cost of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. Acute homeowners can get off the hook a little earlier. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.It can take several years to get to the point where the principal is only 80% of the original amount borrowed, so it's necessary to know how your Texas home has increased in value. After all, any appreciation you've obtained over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends predict decreasing home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home may have gained equity before things cooled off. The difficult thing for most people to figure out is whether their home equity has exceeded the 20% point. A certified, Texas licensed real estate appraiser can surely help. It is an appraiser's job to understand the market dynamics of their area. At MCA Inc., we're experts at pinpointing value trends in Houston, Harris County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At that time, the homeowner 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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