Phoenix Valuations, LLC can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when purchasing a home. The lender's liability is oftentimes only the difference between the home value and the sum due on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value changes on the chance that a purchaser defaults.
The market was working with 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 small down payment? The solution 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 home is lower than the loan balance.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the losses, PMI is lucrative for the lender because they secure the money, and they get the money 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 can a home buyer avoid bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, acute homeowners can get off the hook ahead of time.
Since it can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends predict declining home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have acquired equity before things simmered down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At Phoenix Valuations, LLC, we're masters at analyzing value trends in Scottsdale, Maricopa County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally drop the PMI with little trouble. At which 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: