Let Wronski Appraisal Services Inc. help you decide if you can eliminate your PMI
A 20% down payment is usually the standard when getting a mortgage. Considering the liability for the lender is generally only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value variationson the chance that a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary policy guards the lender in the event a borrower doesn't pay on the loan and the worth of the property is lower than the loan balance.
PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the deficits, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can avoid bearing the cost of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, smart home owners can get off the hook a little early.
It can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, so it's important to know how your home has increased in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be following the national trends and/or your home may have gained equity before things cooled off, so even when nationwide trends hint at plummeting home values, you should understand that real estate is local.
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. It's an appraiser's job to understand the market dynamics of their area. At Wronski Appraisal Services Inc., we know when property values have risen or declined. We're masters at determining value trends in Scottsdale, Maricopa County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually cancel the PMI with little effort. At which 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: