Let ASAP Appraisal Services, Inc. help you determine if you can cancel your PMI
A 20% down payment is usually the standard when purchasing a home. Considering the liability for the lender is generally only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and natural value fluctuationsin the event a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional policy covers the lender in case a borrower defaults on the loan and the worth of the house is lower than the balance of the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. It's favorable for the lender because they collect the money, and they get paid if the borrower is unable to pay, separate 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 buyers can prevent bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute home owners can get off the hook a little earlier. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
Considering it can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, it's necessary to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home could have acquired equity before things cooled off, so even when nationwide trends indicate falling home values, you should understand that real estate is local.
The hardest thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At ASAP Appraisal Services, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Mesa, Maricopa County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally 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: