Have equity in your home? Want a lower payment? An appraisal from D. O'Kane and Company, LLC can help you get rid of your PMI.A 20% down payment is usually the standard when buying a house. The lender's liability is oftentimes only the remainder between the home value and the sum due on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and typical value variations in the event a purchaser is unable to pay.The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan guards the lender if a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan. PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they are covered if the borrower is unable to pay, as opposed to a piggyback loan where the lender consumes all the losses.
How can a homeowner avoid bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, smart home owners can get off the hook a little early.Because it can take many years to reach the point where the principal is only 80% of the original amount of the loan, it's necessary to know how your Arizona home has increased in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not follow national trends and/or your home may have gained equity before things declined. So even when nationwide trends signify a reduction in home values, you should understand that real estate is local. The hardest thing for many homeowners to determine is whether their home equity has exceeded the 20% point. An accredited, Arizona licensed real estate appraiser can surely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At D. O'Kane and Company, LLC, we know when property values have risen or declined. We're experts at identifying value trends in Scottsdale, Maricopa County, and surrounding areas. When faced with data from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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