Wronski Appraisal Services Inc. can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when purchasing a home. The lender's liability is usually 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, reselling the home, and regular value fluctuations on the chance that a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in case a borrower is unable to pay on the loan and the market price of the house is less than the loan balance.
PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they acquire 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 can homeowners refrain from paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook a little earlier.
It can take many years to get to the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has grown in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home could have secured equity before things settled down, so even when nationwide trends forecast falling home values, you should understand that real estate is local.
The hardest thing for many homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to recognize the market dynamics of their area. At Wronski Appraisal Services Inc., we're masters at pinpointing value trends in Scottsdale, 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 usually cancel the PMI with little trouble. 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: