Phoenix Valuations, LLC can help you remove your Private Mortgage Insurance
It's typically understood that a 20% down payment is common when purchasing a home. The lender's liability is generally only the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value variations in the event a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than the loan balance.
Since 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 costly to a borrower. Unlike a piggyback loan where the lender absorbs all the losses, PMI is money-making for the lender because they obtain the money, and they receive payment 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 home owners keep from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Wise homeowners can get off the hook beforehand. The law promises that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to get to the point where the principal is only 20% of the initial amount borrowed, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends forecast plunging home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have secured equity before things simmered down.
A certified, 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 understand 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 data from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. 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: