Have equity in your home? Want a lower payment? An appraisal from Central Arizona Appraisers can help you get rid of your PMI.
When purchasing a home, a 20% down payment is usually the standard. Considering the liability for the lender is generally only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value variationsin the event a purchaser defaults.
Banks were 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 endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the market price of the home is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. Different from a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they obtain 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 home owners can prevent paying PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, acute homeowners can get off the hook a little early.
It can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's essential to know how your home has grown in value. After all, any appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends forecast declining home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At Central Arizona Appraisers, we know when property values have risen or declined. We're masters at recognizing value trends in Phoenix, Maricopa County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often remove the PMI with little effort. 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: