Have equity in your home? Want a lower payment? An appraisal from Veronica Whitman can help you get rid of your PMI.It's typically inferred that a 20% down payment is the standard when buying a house. The lender's only exposure is generally just the difference between the home value and the balance remaining on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and natural value variations on the chance that a purchaser defaults.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders reducing down payments to 10, 5 or sometimes 0 percent. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the market price of the home is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and on many occasions isn't even tax deductible, PMI can be pricey to a borrower. Instead of a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they acquire the money, and they get paid if the borrower defaults.
How buyers can keep from bearing the expense of PMIAs a result of The Homeowners Protection Act of 1998, lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little early.
It can take a significant number of years to get to the point where the principal is only 80% of the initial loan amount, so it's essential to know how your Arizona home has increased in value. After all, any appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends signify falling home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have gained equity before things cooled off.
The difficult thing for many people to figure out is just when their home's equity rises above 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 Veronica Whitman, we know when property values have risen or declined. We're experts at recognizing value trends in Mesa, Maricopa County, and surrounding areas. Faced with data from an appraiser, the mortgage company will often do away with the PMI with little effort. 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: