Have equity in your home? Want a lower payment? An appraisal from Central Arizona Appraisers can help you get rid of your PMI.
It's widely known that a 20% down payment is common when purchasing a home. Because the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuationsin the event a purchaser doesn't pay.
Lenders were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the market price of the house is less than the balance of the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the costs, PMI is money-making for the lender because they acquire the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers avoid bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen home owners can get off the hook a little early.
Since it can take many years to get to the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends signify plunging home values, you should understand that real estate is local.
The hardest thing for most homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Central Arizona Appraisers, we know when property values have risen or declined. We're masters at identifying value trends in Phoenix, Maricopa County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: