Phoenix Valuations, LLC can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. Considering the risk for the lender is generally only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and natural value variationsin the event a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan protects the lender in case a borrower defaults on the loan and the worth of the house is less than the loan balance.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they get paid if the borrower doesn't pay, opposite from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy homeowners can get off the hook ahead of time. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent.
Considering it can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends hint at falling home values, you should realize that real estate is local.
The difficult thing for almost all home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At Phoenix Valuations, LLC, we're experts at pinpointing value trends in Scottsdale, Maricopa County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often do away with 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: