Phoenix Valuations, LLC can help you remove your Private Mortgage Insurance
It's typically known that a 20% down payment is accepted when getting a mortgage. The lender's risk is often only the difference between the home value and the amount outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the value of the property is less than the loan balance.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is profitable for the lender because they collect 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 a homeowner refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law designates that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, keen homeowners can get off the hook ahead of time.
Since it can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, all of the appreciation you've acquired 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 might not be adopting the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends signify falling home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Phoenix Valuations, LLC, we know when property values have risen or declined. We're masters at pinpointing value trends in Scottsdale, Maricopa County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often drop the PMI with little effort. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: