Have equity in your home? Want a lower payment? An appraisal from ASAP Appraisal Services, Inc. can help you get rid of your PMI.
It's typically understood that a 20% down payment is common when buying a house. Considering the liability for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value changeson the chance that a borrower doesn't pay.
Banks were accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they acquire the money, and they get paid if the borrower is unable to pay, different from a piggyback loan where the lender consumes 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 refrain from bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, keen home owners can get off the hook sooner than expected.
It can take countless years to get to the point where the principal is only 20% of the initial amount borrowed, so it's crucial to know how your home has increased in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends indicate plummeting home values, you should understand that real estate is local.
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 difficult thing to know. It is an appraiser's job to know the market dynamics of their area. At ASAP Appraisal Services, Inc., we're experts at determining value trends in Mesa, 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 most often remove the PMI with little trouble. 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: