Let Timeline Appraisal Services, LLC help you figure out if you can get rid of your PMIWhen getting a mortgage, a 20% down payment is usually the standard. Since the liability for the lender is generally only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value changesin the event a borrower doesn't pay. During the recent mortgage boom of the last decade, it became customary to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan protects the lender if a borrower defaults on the loan and the value of the home is lower than the balance of the loan. PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the costs, PMI is profitable for the lender because they collect the money, and they get paid if the borrower defaults. Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI. How can a home owner prevent bearing the expense of PMI?The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart homeowners can get off the hook ahead of time. The law pledges that, upon 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 initial amount of the loan, so it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends predict falling home values, you should understand that real estate is local. An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Timeline Appraisal Services, LLC, we're masters at determining 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 generally drop the PMI with little anxiety. At that time, the home owner can retain the savings from that point on.
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