Have equity in your home? Want a lower payment? An appraisal from Northern Arizona Appraisal, Inc. can help you get rid of your PMI.
A 20% down payment is usually accepted when getting a mortgage. Considering the liability for the lender is oftentimes only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value changeson the chance that a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy protects the lender if a borrower defaults on the loan and the worth of the property is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they collect the money, and they get the money if the borrower defaults, separate from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can refrain from bearing the expense of PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen home owners can get off the hook beforehand. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take countless years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends predict falling home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have secured equity before things cooled off.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Northern Arizona Appraisal, Inc., we're experts at analyzing value trends in Phoenix, Maricopa 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 often cancel the PMI with little trouble. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: