Phoenix Valuations, LLC can help you remove your Private Mortgage Insurance
It's generally known that a 20% down payment is common when buying a house. Since the liability for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value changeson the chance that a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the value of the property is less 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 compiled into the mortgage monthly payment and frequently isn't even tax deductible. It's money-making for the lender because they secure the money, and they get the money if the borrower defaults, unlike a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook ahead of time. The law pledges that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
Because it can take many years to get to the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has increased in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends predict falling home values, you should realize that real estate is local.
The hardest thing for almost all home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It is 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 experts at determining value trends in Scottsdale, Maricopa County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually cancel the PMI with little effort. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: