Let Desert Sky Appraisers help you determine if you can eliminate your PMI
It's generally understood that a 20% down payment is the standard when getting a mortgage. Because the liability for the lender is often only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and typical value variationson the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it became common to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. This added policy guards the lender if a borrower is unable to pay on the loan and the worth of the property is lower than what the borrower still owes on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the damages, PMI is money-making 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 employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook ahead of time.
It can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has grown in value. After all, any appreciation you've obtained over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be following the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends forecast decreasing home values, you should realize that real estate is local.
The hardest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. 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 experts at recognizing value trends in Chandler, Maricopa County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: