Have equity in your home? Want a lower payment? An appraisal from Marketwise Appraisal, LLC can help you get rid of your PMI.When buying a house, a 20% down payment is usually the standard. The lender's liability is oftentimes only the difference between the home value and the balance outstanding on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and typical value variations on the chance that a borrower is unable to pay.
During the recent mortgage upturn that our country recently experienced, it became widespread to see lenders making deals with down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender in case a borrower defaults on the loan and the value of the home is less than the balance of the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. It's advantageous for the lender because they collect the money, and they are covered if the borrower defaults, as opposed to a piggyback loan where the lender absorbs all the losses.
How can home buyers refrain from bearing the cost of PMI?The Homeowners Protection Act of 1998 requires the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook a little earlier.
Since it can take several years to reach the point where the principal is only 80% of the original loan amount, it's essential to know how your Arizona home has increased in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not conform to national trends and/or your home might have acquired equity before things simmered down. So even when nationwide trends signify a reduction in home values, you should know most importantly that real estate is local.
The hardest thing for many homeowners to figure out is whether their home equity has exceeded the 20% point. An accredited, Arizona licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Marketwise Appraisal, LLC, we know when property values have risen or declined. We're masters at identifying value trends in Laveen, Maricopa County, and surrounding areas. Faced with information from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: