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Let Desert Sky Appraisers help you figure out if you can eliminate your PMI
When getting a mortgage, a 20% down payment is usually the standard.
The lender's risk is usually only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower defaults.
During the recent mortgage boom that our country recently experienced, it became common to see lenders making deals with down payments of 10, 5, 3 or sometimes 0 percent.
How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI.
PMI takes care of the lender in case a borrower doesn't pay on the loan and the value of the property is less than the balance of the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible.
It's lucrative for the lender because they obtain the money, and they receive payment if the borrower defaults, in contrast to a piggyback loan where the lender takes in all the costs.
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Does your monthly loan payment include a fee PMI? Call Desert Sky Appraisers today at 480-361-9493 or send us an e-mail. A new appraisal could save you thousands.
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How homeowners can keep from bearing the expense of PMI
The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount.
The law designates that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, keen home owners can get off the hook a little earlier.
Considering it can take many years to reach the point where the principal is only 80% of the original amount of the loan, it's crucial to know how your Arizona home has appreciated in value.
After all, every bit of appreciation you've acquired over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold?
Your neighborhood may not conform to national trends and/or your home could have gained equity before the economy declined. So even when nationwide trends hint at declining home values, you should understand that real estate is local.
A certified, Arizona licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a hard thing to know.
It is an appraiser's job to keep up with the market dynamics of their area.
At Desert Sky Appraisers, we're experts at pinpointing value trends in Chandler, Maricopa County, and surrounding areas, and we know when property values have risen or declined.
Faced with information from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
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Is PMI something increasing your monthly house payment? Call Desert Sky Appraisers today at 480-361-9493 or send us an e-mail. A new appraisal could save you thousands.
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Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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