Have equity in your home? Want a lower payment? An appraisal from Select Appraisal Group can help you get rid of your PMI.A 20% down payment is typically accepted when buying a house. Because the liability for the lender is often only the difference between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value variations in the event a purchaser doesn't pay.The market was working with down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental policy protects the lender in case a borrower defaults on the loan and the value of the property is lower than what the borrower still owes on the loan. Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI can be expensive to a borrower. It's lucrative for the lender because they secure the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender takes in all the costs.
How can homebuyers refrain from bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on most loans. Keen homeowners can get off the hook beforehand. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.It can take a significant number of years to reach the point where the principal is only 80% of the original amount of the loan, so it's crucial to know how your Arizona home has increased in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends signify lower overall home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things simmered down. A certified, Arizona licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to know the market dynamics of their area. At Select Appraisal Group, we know when property values have risen or declined. We're masters at identifying value trends in Gilbert, Maricopa County, and surrounding areas. Faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At that time, the home owner can delight in 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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