Have equity in your home? Want a lower payment? An appraisal from Central Arizona Appraisers can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. Since the liability for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value changesin the event a borrower is unable to pay.
The market was working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added 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 is unable to pay on the loan and the market price of the property is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they secure the money, and they get the money if the borrower defaults, separate 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 can buyers keep from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, smart home owners can get off the hook a little earlier.
Considering it can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends forecast 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 rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to know the market dynamics of their area. At Central Arizona Appraisers, we're experts at determining value trends in Phoenix, Maricopa County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often cancel the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: