Have equity in your home? Want a lower payment? An appraisal from T.R. Moore & Associates, Inc. can help you get rid of your PMI.A 20% down payment is usually the standard when purchasing a home. Because the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value variations in the event a borrower defaults.
During the recent mortgage upturn that our country recently experienced, it was widespread to see lenders reducing down payments to 10, 5 or sometimes 0 percent. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the value of the home is lower than the loan balance.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get the money if the borrower doesn't pay, in contrast to a piggyback loan where the lender takes in all the losses.
How can buyers keep from bearing the expense of PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute homeowners can get off the hook a little earlier. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take a significant number of years to arrive at the point where the principal is only 80% of the original amount of the loan, so it's crucial to know how your Arizona home has appreciated in value. After all, every bit of appreciation you've acquired over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not conform to national trends and/or your home may have gained equity before things cooled off. So even when nationwide trends hint at declining home values, you should understand that real estate is local.
The hardest thing for many homeowners to figure out is just when their home's equity rises above the 20% point. A certified, Arizona licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At T.R. Moore & Associates, Inc., we're experts at identifying value trends in Mesa, Maricopa County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At which 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year