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 typically understood that a 20% down payment is the standard when purchasing a home. The lender's risk is generally only the difference between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value changes on the chance that a borrower doesn't pay.
The market was taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added policy guards the lender in case a borrower doesn't pay on the loan and the value of the house is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI can be pricey to a borrower. It's beneficial for the lender because they obtain the money, and they receive payment if the borrower defaults, separate from a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy home owners can get off the hook sooner than expected. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've acquired 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% threshold? Your neighborhood may not be minding the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends indicate plummeting home values, you should understand that real estate is local.
The difficult thing for almost all homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Central Arizona Appraisers, we know when property values have risen or declined. We're experts at pinpointing value trends in Phoenix, Maricopa County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often do away with the PMI with little effort. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: