Have equity in your home? Want a lower payment? An appraisal from ASAP Appraisal Services, Inc. can help you get rid of your PMI.
When buying a house, a 20% down payment is typically the standard. Because the risk for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuationsin the event a borrower defaults.
During the recent mortgage boom of the last decade, it was common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender in the event a borrower defaults on the loan and the worth of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, contradictory to a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers avoid bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy homeowners can get off the hook a little earlier. The law promises that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has appreciated in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be minding the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.
The difficult thing for many home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At ASAP Appraisal Services, Inc., we're masters at identifying value trends in Mesa, 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 anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: