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Let Northern Arizona Appraisal, Inc. help you decide if you can get rid of your PMI
When buying a house, a 20% down payment is usually the standard.
The lender's risk is usually only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuations in the event a purchaser is unable to pay.
The market was working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom.
How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI.
This supplementary policy takes care of the lender if a borrower doesn't pay on the loan and the market price of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI is costly to a borrower.
As opposed to a piggyback loan where the lender consumes all the costs, PMI is advantageous for the lender because they collect the money, and they receive payment if the borrower defaults.
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The savings from dropping your PMI will make up for the cost of the appraisal in no time. Northern Arizona Appraisal, Inc. has years of experience with value trends in the city of Phoenix and Maricopa County. Contact us today.
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How can home buyers keep from paying PMI?
As a result of The Homeowners Protection Act of 1998, lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on nearly all loans.
Savvy home owners can get off the hook a little early. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
Because it can take a significant number of years to reach the point where the principal is just 80% of the initial amount of the loan, it's necessary to know how your Arizona home has appreciated in value.
After all, any appreciation you've obtained 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 lower overall home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have acquired equity before things simmered down.
The hardest thing for almost all consumers to figure out is just when their home's equity rises above the 20% point. A certified, Arizona licensed real estate appraiser can certainly help.
Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job!
At Northern Arizona Appraisal, Inc., we're experts at pinpointing value trends in Phoenix, 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 often cancel the PMI with little trouble. At that time, the home owner can enjoy the savings from that point on.
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Does your monthly mortgage payment have a lineitem for PMI? Call Northern Arizona Appraisal, Inc. today at 928-856-0888 or send us an e-mail. Documentation of your home's present value could save you thousands.
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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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