Have equity in your home? Want a lower payment? An appraisal from Powers Real Estate Services, LLC can help you get rid of your PMI.
A 20% down payment is usually accepted when getting a mortgage. Since the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value variationsin the event a borrower defaults.
The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender in case a borrower is unable to pay on the loan and the value of the house is lower than what is owed on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. It's favorable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer prevent paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, keen home owners can get off the hook sooner than expected.
It can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's important to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends hint at decreasing home values, you should realize that real estate is local.
The difficult thing for almost all home owners to understand 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 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 generally cancel the PMI with little trouble. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: