Powers Real Estate Services, LLC can help you remove your Private Mortgage Insurance
It's generally understood that a 20% down payment is accepted when getting a mortgage. Since the risk for the lender is generally only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value fluctuationsin the event a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the worth of the property is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly 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 costs, PMI is beneficial for the lender because they acquire 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 home buyers can keep from paying PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Acute homeowners can get off the hook a little early. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's essential to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends predict plummeting home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to understand the market dynamics of their area. At Powers Real Estate Services, LLC, we know when property values have risen or declined. We're experts at pinpointing value trends in San Tan Valley, Pinal County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often drop the PMI with little effort. At which 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: