Have equity in your home? Want a lower payment? An appraisal from Horizon Appraisals can help you get rid of your PMI.A 20% down payment is typically accepted when getting a mortgage. The lender's liability is usually only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and natural value variations on the chance that a purchaser is unable to pay.During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders reducing down payments to 10, 5, 3 or even 0 percent. How does a lender endure the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the market price of the house is less than the balance of the loan. PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the damages, PMI is profitable for the lender because they secure the money, and they get the money if the borrower is unable to pay.
How buyers can avoid bearing the expense of PMIThe Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy homeowners can get off the hook a little earlier. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.It can take several years to get to the point where the principal is only 80% of the original amount of the loan, so it's necessary to know how your Arizona home has grown in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends predict lower overall home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home could have secured equity before things cooled off. A certified, Arizona licensed real estate appraiser can help homeowners figure out if their equity has made it to the 20% point, as it's a difficult thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Horizon Appraisals, we're experts at determining value trends in Glendale, Maricopa County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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