Wronski Appraisal Services Inc. can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is typically the standard. Because the risk for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and typical value variationson the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the worth of the house is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they secure the money, and they get paid if the borrower is unable to pay, different from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners avoid bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute home owners can get off the hook a little early. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take many years to reach the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has grown in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends signify declining home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home may have gained equity before things simmered down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over 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 Wronski Appraisal Services Inc., we're experts at pinpointing value trends in Scottsdale, 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 generally do away with the PMI with little anxiety. At which 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: