Phoenix Valuations, LLC can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. Since the risk for the lender is generally only the difference between the home value and the amount due on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value fluctuationson the chance that a borrower doesn't pay.
Banks were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the value of the home is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can refrain from bearing the expense of PMI
With the employment 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 primary loan amount. Savvy home owners can get off the hook a little early. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
Because it can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, it's important to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home may have acquired equity before things settled down, so even when nationwide trends hint at plunging home values, you should realize that real estate is local.
The hardest thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At Phoenix Valuations, LLC, we're masters 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 often remove the PMI with little effort. 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: