Acute Dimensions, LLC can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when getting a mortgage. The lender's liability is usually only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and typical value variations in the event a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the value of the property is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. Unlike a piggyback loan where the lender takes in all the damages, PMI is favorable 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 home buyers can keep from paying PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law states that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute home owners can get off the hook ahead of time.
It can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, so it's important to know how your home has grown in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends signify 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 settled down.
The hardest thing for many homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At Acute Dimensions, LLC, we know when property values have risen or declined. We're experts at analyzing value trends in Chandler, Maricopa County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little trouble. 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: