Have equity in your home? Want a lower payment? An appraisal from Central Arizona Appraisers can help you get rid of your PMI.
A 20% down payment is usually the standard when purchasing a home. Since the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value variationsin the event a purchaser is unable to pay.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the worth of the home is less than what is owed on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the deficits, PMI is beneficial 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 buyers can avoid paying PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Smart homeowners can get off the hook sooner than expected. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 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 grown in value. After all, every bit of appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends signify decreasing home values, you should understand that real estate is local.
The toughest thing for almost all homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Central Arizona Appraisers, we're masters at determining value trends in Phoenix, Monterey County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At that 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: