Have equity in your home? Want a lower payment? An appraisal from Desert Sky Appraisers can help you get rid of your PMI.
When buying a house, a 20% down payment is typically the standard. The lender's liability is often only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser doesn't pay.
Lenders were working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan protects the lender in the event a borrower doesn't pay on the loan and the market price of the home is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they collect the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers keep from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart homeowners can get off the hook a little earlier. The law promises that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Since it can take many years to reach the point where the principal is only 20% of the original amount borrowed, it's necessary to know how your home has appreciated in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be minding the national trends and/or your home could have acquired equity before things calmed down, so even when nationwide trends predict plunging home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Desert Sky Appraisers, we're masters at identifying value trends in Chandler, Maricopa County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually drop the PMI with little trouble. 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: