Let Acute Dimensions, LLC help you figure out if you can eliminate your PMI
A 20% down payment is typically accepted when getting a mortgage. Because the risk for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and natural value changeson the chance that a purchaser defaults.
During the recent mortgage upturn of the last decade, it was widespread to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan protects the lender in the event a borrower is unable to pay on the loan and the worth of the home is less than the balance of the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. Different from a piggyback loan where the lender consumes all the costs, PMI is lucrative for the lender because they collect 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 homeowners can keep from paying PMI
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, keen homeowners can get off the hook ahead of time.
It can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's crucial to know how your home has grown in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends indicate decreasing home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things cooled off.
An accredited, licensed real estate appraiser can help homeowners 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 Acute Dimensions, LLC, we know when property values have risen or declined. We're experts at recognizing value trends in Chandler, Maricopa County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often remove the PMI with little trouble. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: