Let Acute Dimensions, LLC help you figure out if you can cancel your PMI
A 20% down payment is usually the standard when getting a mortgage. Considering the liability for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and regular value variationson the chance that a purchaser doesn't pay.
During the recent mortgage boom of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the value of the house is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible, PMI can be expensive to a borrower. Separate from a piggyback loan where the lender takes in all the deficits, PMI is beneficial for the lender because they collect the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners avoid bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise homeowners can get off the hook sooner than expected. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has grown in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends hint at declining home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is 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 masters at pinpointing value trends in Chandler, Maricopa County and surrounding areas. Faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: