Powers Real Estate Services, LLC can help you remove your Private Mortgage Insurance
It's typically understood that a 20% down payment is the standard when getting a mortgage. Since the risk for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuationson the chance that a purchaser defaults.
During the recent mortgage upturn of the last decade, it became common to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to handle the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the worth of the home is lower than what is owed on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the costs, PMI is lucrative for the lender because they secure 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 can homebuyers avoid bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, savvy 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 loan amount, so it's crucial to know how your home has increased in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends predict plunging home values, you should realize 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 is an appraiser's job to keep up with the market dynamics of their area. At Powers Real Estate Services, LLC, we know when property values have risen or declined. We're masters at recognizing value trends in San Tan Valley, Pinal County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At that 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: