Powers Real Estate Services, LLC can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when purchasing a home. The lender's liability is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value variations on the chance that a purchaser defaults.
The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the market price of the home is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's profitable for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, unlike 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 home buyers can refrain from paying PMI
The Homeowners Protection Act of 1998 requires 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. Savvy home owners can get off the hook ahead of time. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends signify decreasing home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home could have acquired equity before things cooled off.
The hardest thing for almost all home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Powers Real Estate Services, LLC, we know when property values have risen or declined. We're experts at identifying value trends in San Tan Valley, Pinal County and surrounding areas. Faced with data from an appraiser, the mortgage company will often remove 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: