Let Phoenix Valuations, LLC help you figure out if you can eliminate your PMI
A 20% down payment is typically accepted when purchasing a home. The lender's liability is often only the difference between the home value and the sum due on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and regular value variations in the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy covers the lender in the event a borrower is unable to pay on the loan and the value of the home is lower than what is owed on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible. It's favorable for the lender because they secure the money, and they get paid if the borrower defaults, contradictory to 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 buyers can refrain from bearing the expense of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Keen home owners can get off the hook ahead of time. The law designates that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
Since it can take many years to reach the point where the principal is just 20% of the original amount of the loan, it's essential to know how your home has grown in value. After all, any appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends predict plummeting home values, you should realize that real estate is local.
The hardest thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Phoenix Valuations, LLC, we know when property values have risen or declined. We're experts at recognizing value trends in Scottsdale, Maricopa County and surrounding areas. Faced with data from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which 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: