Let Desert View Appraisals help you determine if you can get rid of your PMI
A 20% down payment is typically accepted when getting a mortgage. Because the risk for the lender is generally only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value changes on the chance that a borrower defaults.
During the recent mortgage boom of the last decade, it was widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender in case a borrower defaults on the loan and the value of the home is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they secure the money, and they get paid if the borrower doesn't 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 refrain from bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise homeowners can get off the hook sooner than expected. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Since it can take many years to reach the point where the principal is only 20% of the initial loan amount, 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 should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends hint at decreasing home values, realize that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have gained equity before things settled down.
The difficult thing for most homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to keep up with the market dynamics of their area. At Desert View Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in the Metro Phoenix area. Faced with data from an appraiser, the mortgage company will usually cancel the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: