Have equity in your home? Want a lower payment? An appraisal from Phoenix Valuations, LLC can help you get rid of your PMI.
A 20% down payment is usually the standard when buying a house. Considering the risk for the lender is often only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value variationsin the event a borrower is unable to pay.
Lenders were working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan guards the lender if a borrower doesn't pay on the loan and the worth of the house is lower than what the borrower still owes on the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. It's advantageous for the lender because they acquire the money, and they get paid if the borrower defaults, contradictory to a piggyback loan where the lender consumes all the damages.
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 refrain from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, acute home owners can get off the hook sooner than expected.
Since it can take countless years to reach the point where the principal is only 20% of the original amount borrowed, it's essential to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
The hardest thing for most home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Phoenix Valuations, LLC, we're masters at determining value trends in Scottsdale, Maricopa County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often cancel the PMI with little effort. At that 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: