Have equity in your home? Want a lower payment? An appraisal from Allstate Appraisal, Inc. can help you get rid of your PMI.
A 20% down payment is typically the standard when getting a mortgage. Since the risk for the lender is generally only the difference between the home value and the amount due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and typical value variationson the chance that a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy guards the lender in the event a borrower is unable to pay on the loan and the market price of the property is lower than the balance of the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. Different from a piggyback loan where the lender takes in all the costs, PMI is favorable for the lender because they acquire the money, and they get the money 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 home owners prevent bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen home owners can get off the hook a little earlier. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Since it can take many years to get to the point where the principal is just 20% of the original loan amount, it's necessary to know how your home has increased in value. After all, any appreciation you've achieved over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends predict declining home values, understand that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have acquired equity before things simmered down.
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 hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Allstate Appraisal, Inc., we're masters at determining value trends in Phoenix, Maricopa County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At which 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: