Central Arizona Appraisers can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when purchasing a home. Considering the liability for the lender is oftentimes only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value changesin the event a purchaser defaults.
During the recent mortgage boom of the last decade, it was common to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the market price of the property is less than the loan balance.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can refrain from bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook a little early.
Since it can take many years to arrive at the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has grown in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends signify plunging home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have secured equity before things simmered down.
The toughest thing for many homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to know the market dynamics of their area. At Central Arizona Appraisers, we're masters at pinpointing value trends in Phoenix, Maricopa County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little trouble. 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: