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 typically the standard when buying a house. Since the liability for the lender is usually only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and natural value variationson the chance that a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in the event a borrower is unable to pay on the loan and the worth of the home is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they secure the money, and they get the money if the borrower defaults, opposite from a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can keep from bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Savvy home owners can get off the hook ahead of time. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take countless years to get to the point where the principal is only 20% of the initial loan amount, so it's essential to know how your home has appreciated in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends forecast falling home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home might have gained equity before things cooled off.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Phoenix Valuations, LLC, we know when property values have risen or declined. We're masters at analyzing value trends in Scottsdale, Maricopa County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often drop the PMI with little effort. At which 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: