Let Desert Sky Appraisers help you discover if you can eliminate your PMI
It's widely understood that a 20% down payment is accepted when getting a mortgage. The lender's liability is oftentimes only the difference between the home value and the amount due on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations in the event a borrower defaults.
The market was working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the worth of the house is lower than what the borrower still owes on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the damages, PMI is beneficial for the lender because they acquire the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart home owners can get off the hook beforehand. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
Since it can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, it's essential to know how your home has grown in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends signify declining home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home might have secured equity before things settled down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Desert Sky Appraisers, we know when property values have risen or declined. We're masters at analyzing value trends in Chandler, Maricopa County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often 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: