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 largely understood that a 20% down payment is the standard when purchasing a home. Considering the liability for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value changeson the chance that a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the worth of the house is less than what is owed on the loan.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they collect 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 homeowners can keep from bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook ahead of time.
It can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's necessary to know how your home has appreciated in value. After all, any appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends signify declining home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home may have gained equity before things cooled off.
The toughest thing for many home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At ASAP Appraisal Services, Inc., we know when property values have risen or declined. We're experts at determining value trends in Mesa, Maricopa County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which 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: