Northern Arizona Appraisal, Inc. can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is usually the standard. The lender's risk is oftentimes only the remainder between the home value and the sum due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value variations on the chance that a borrower doesn't pay.
The market was accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the worth of the property is lower than what is owed on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. It's favorable for the lender because they acquire the money, and they get the money if the borrower defaults, unlike a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How buyers can avoid bearing the expense 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 reaches 78 percent of the primary loan amount. Wise home owners can get off the hook a little early. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends hint at plummeting home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have secured equity before things cooled off.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Northern Arizona Appraisal, Inc., we're experts at identifying value trends in Phoenix, Maricopa County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At which 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: