Have equity in your home? Want a lower payment? An appraisal from Metes & Bounds Valuation Services can help you get rid of your PMI.A 20% down payment is usually accepted when buying a house. Since the risk for the lender is often only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and typical value changes in the event a purchaser defaults.During the recent mortgage upturn of the mid 2000s, it was customary to see lenders reducing down payments to 10, 5, 3 or sometimes 0 percent. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This added plan protects the lender in case a borrower is unable to pay on the loan and the value of the property is lower than the balance of the loan. Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's profitable for the lender because they obtain the money, and they are covered if the borrower defaults, in contrast to a piggyback loan where the lender takes in all the losses.
How can home buyers keep from bearing the expense of PMI?The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, keen home owners can get off the hook sooner than expected.Considering it can take many years to get to the point where the principal is just 80% of the original amount borrowed, it's important to know how your Arizona home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends predict declining home values, realize that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have secured equity before things declined. The difficult thing for many homeowners to figure out is just when their home's equity goes over if their home equity has exceeded the 20% point. A certified, Arizona licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Metes & Bounds Valuation Services, we're masters at recognizing value trends in Scottsdale, Maricopa County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At which time, the homeowner can retain 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
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