Let Phoenix Valuations, LLC help you determine if you can get rid of your PMI

It's generally understood that a 20% down payment is common when purchasing a home. The lender's risk is often only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and natural value variations in the event a purchaser defaults.

During the recent mortgage upturn of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy takes care of the lender in the event a borrower is unable to pay on the loan and the worth of the property 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 bundled into the mortgage monthly payment and frequently isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the costs, PMI is money-making for the lender because they acquire the money, and they get the money 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 homebuyers can avoid bearing the cost of PMI

The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise homeowners can get off the hook beforehand. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.

It can take countless years to reach the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has appreciated in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends signify declining home values, understand that real estate is local. Your neighborhood may not be adopting the national trends and/or your home may have gained equity before things cooled off.

The toughest thing for almost all homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their 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 data from an appraiser, the mortgage company will usually cancel the PMI with little effort. 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year