Have equity in your home? Want a lower payment? An appraisal from ASAP Appraisal Services, Inc. can help you get rid of your PMI.
It's widely understood that a 20% down payment is common when buying a house. The lender's risk is generally only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value variations on the chance that a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it was common to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This added policy protects the lender in the event a borrower is unable to pay on the loan and the market price of the property is less than what the borrower still owes on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible. It's money-making for the lender because they acquire the money, and they get paid if the borrower is unable to pay, contradictory to a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can keep from bearing the expense of PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute homeowners can get off the hook a little earlier. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
Since it can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home could have gained equity before things calmed down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At ASAP Appraisal Services, Inc., we know when property values have risen or declined. We're masters at pinpointing value trends in Mesa, Maricopa County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: