Northern Arizona Appraisal, Inc. can help you remove your Private Mortgage Insurance

A 20% down payment is typically accepted when purchasing a home. The lender's risk is usually only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value variations on the chance that a borrower defaults.

During the recent mortgage upturn of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender in case a borrower is unable to pay on the loan and the market price of the house is less than what is owed on the loan.

Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender consumes all the costs, PMI is advantageous 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 can a home owner refrain from bearing the expense of PMI?

The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen home owners can get off the hook a little earlier. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.

Since it can take many years to arrive at the point where the principal is only 20% of the initial loan amount, it's important to know how your home has appreciated in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends hint at decreasing home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have gained equity before things settled down.

The hardest thing for many home owners to understand 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 Northern Arizona Appraisal, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Phoenix, Maricopa County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally drop the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.

Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year