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.
When purchasing a home, a 20% down payment is usually the standard. Because 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, selling the home again, and regular value variationson the chance that a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the market price of the house is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI is costly to a borrower. It's favorable for the lender because they secure the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer refrain from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook ahead of time.
Since it can take countless years to reach the point where the principal is just 20% of the original loan amount, it's essential to know how your home has increased in value. After all, every bit of appreciation you've acquired over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends predict decreasing home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things cooled off.
The difficult thing for almost all homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly 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 determining value trends in San Tan Valley, Pinal County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually drop the PMI with little trouble. At that 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: