Have equity in your home? Want a lower payment? An appraisal from CRANE REAL ESTATE APPRAISALS can help you get rid of your PMI.
A 20% down payment is typically accepted when purchasing a home. Since the risk for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and regular value changesin the event a borrower is unable to pay.
Banks were accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan takes care of the lender if a borrower is unable to pay on the loan and the market price of the house is less than what the borrower still owes 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 many times isn't even tax deductible. Different from a piggyback loan where the lender consumes all the costs, PMI is advantageous for the lender because they collect the money, and they get paid 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 homebuyers can avoid bearing the expense of PMI
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart homeowners can get off the hook beforehand. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take many years to reach the point where the principal is just 20% of the original loan amount, it's crucial to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends hint at plummeting home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things simmered down.
The hardest thing for most home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At CRANE REAL ESTATE APPRAISALS, we know when property values have risen or declined. We're masters at analyzing value trends in Phoenix, Maricopa County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often do away with the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: