Let Phoenix Valuations, LLC help you figure out if you can eliminate your PMI
When purchasing a home, a 20% down payment is usually the standard. Because the risk for the lender is generally 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, reselling the home, and regular value changeson the chance that a purchaser is unable to pay.
Banks were accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional policy takes care of the lender if a borrower defaults on the loan and the market price of the house is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be expensive to a borrower. Separate from a piggyback loan where the lender absorbs all the losses, PMI is favorable for the lender because they obtain the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy home owners can get off the hook sooner than expected. The law promises that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
Considering it can take countless years to get to the point where the principal is only 20% of the original loan amount, it's necessary to know how your home has appreciated in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends signify decreasing home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have acquired equity before things simmered down.
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 tough 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 experts at pinpointing value trends in Scottsdale, Maricopa County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. 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: