Powers Real Estate Services, LLC can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when purchasing a home. Since the liability for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value variationsin the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower than the balance of the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the deficits, PMI is advantageous for the lender because they acquire the money, and they receive payment 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 homeowners refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Wise homeowners can get off the hook ahead of time. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take countless years to reach the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has appreciated in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So why should you 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 could have gained equity before things settled down, so even when nationwide trends hint at plummeting home values, you should understand 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 difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Powers Real Estate Services, LLC, we know when property values have risen or declined. We're masters at analyzing value trends in San Tan Valley, Pinal County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally drop the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: