Powers Real Estate Services, LLC can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. Considering the liability for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuationsin the event a purchaser doesn't pay.
Banks were taking 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 handle the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower is unable to pay on the loan and the worth of the home is less than the loan balance.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. It's lucrative for the lender because they collect the money, and they get the money if the borrower defaults, unlike a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook a little earlier.
It can take countless years to get to the point where the principal is only 20% of the original amount of the loan, so it's important to know how your home has grown in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends hint at falling home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Powers Real Estate Services, LLC, we're experts at analyzing value trends in San Tan Valley, Pinal County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At which 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: