Let ASAP Appraisal Services, Inc. help you figure out if you can cancel your PMI
It's typically inferred that a 20% down payment is the standard when getting a mortgage. The lender's risk is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value variations in the event a purchaser doesn't pay.
Lenders were taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy covers the lender in the event a borrower defaults on the loan and the value of the property is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they secure the money, and they get the money if the borrower is unable to pay.
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 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 primary loan amount. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen home owners can get off the hook sooner than expected.
Since it can take many years to get to the point where the principal is only 20% of the initial amount of the loan, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends signify plunging home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have secured equity before things calmed down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At ASAP Appraisal Services, Inc., we know when property values have risen or declined. We're experts at recognizing value trends in Mesa, Maricopa County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. 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: