Have equity in your home? Want a lower payment? An appraisal from Precise Real Estate Services, llc can help you get rid of your PMI.
It's widely known that a 20% down payment is common when getting a mortgage. Considering the risk for the lender is usually only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and typical value fluctuationsin the event a purchaser is unable to pay.
The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the market price of the home is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is beneficial for the lender because they obtain the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers refrain from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise homeowners can get off the hook sooner than expected. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the original amount borrowed, so it's necessary to know how your home has increased in value. After all, any appreciation you've gained over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends predict plummeting home values, you should understand that real estate is local.
The hardest thing for most home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to recognize the market dynamics of their area. At Precise Real Estate Services, llc, we're masters at pinpointing value trends in Gilbert, Maricopa County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually drop the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: