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.
It's largely known that a 20% down payment is the standard when buying a house. The lender's risk is generally only the difference between the home value and the sum due on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value changes in the event a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional plan takes care of the lender in the event a borrower defaults on the loan and the market price of the house is lower than the loan balance.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners refrain from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law states 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 earlier.
It can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has grown in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends forecast 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 difficult 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 identifying value trends in San Tan Valley, Pinal County and surrounding areas. Faced with information from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: