I recently reached out to Craig Barber of Fairway Independent Mortgage, a regular contributor here, to ask about potential article ideas and from that conversation came this amazing article from Adam Wiener of Aladdin Appraisals on how to use today's increased property values to drop your private mortgage insurance premiums and save on your monthly payments.
Have you given any thought to exactly what makes up your monthly mortgage payment? If you purchased your home with less than 20% down payment, you are paying private mortgage insurance (PMI). PMI is an insurance you agreed to pay to compensate for the higher risk the lender took on your purchase. With favorable market conditions in our area many home values have increased. The question to ask is; is my mortgage balance now lower than 80% of my homes fair market value? If so, you should remove the PMI immediately and lower your monthly payments putting that money back into your pocket.
There is legislation requiring lenders to communicate about PMI but it is not advisable for you to wait for the lender to get around to contacting you. If you’ve reached 20% equity in your home by either appreciation, home improvements or paying down the principal mortgage balance (or any combination of the three) you can force the lender to cancel your PMI. Most lenders have a brief form to fill out, and you must provide proof positive of sufficient equity over 20%.
Lenders will not accept your tax assessor’s value, a Brokers Price Opinion (BPO) or a Zestimate. The assessed value has absolutely no supportable correlation whatsoever with the fair market value. A tax assessment is not the same as an appraisal because the intended use of the assessed value is primarily reserved for property taxation purposes. Actual sales used in the assessment process lag at least six months behind. BPOs are not considered accurate enough for federally secured mortgages (FNMA). Zillow publishes its own comparison of actual sales prices vs. their Zestimates which reveals an alarming rate of inaccuracy.
The positive financial impact when you halt PMI payments is similar to plugging a leak in the bottom of a bowl; your money now begins to accumulate. This simple move can give you access to a pool of funds which can be a financial game changer for your family as you can pay down other debt, invest in retirement, start a college or a vacation fund, etc.
You need to hire the services of a professional real estate appraiser to estimate the fair market value of your properties. The appraisal should be in the form of a well-supported, professional, appraisal report. State and Federal laws require that the Appraiser and the appraisal process be independent from any influence, coercion or undue pressure. Appraisers cannot accept an appraisal assignment based on a predetermined value. This allows the Appraiser to remain an independent, third-party.
Our approach: We understand the potential positive impact to you when you remove PMI . We offer a free initial consultation and in some cases it may be fairly obvious if an appraisal is appropriate or not. It is typically not possible to determine in advance if you have sufficient equity in your home to enable you to cancel your PMI.
Appraisers are prohibited by the Uniform Standards of Professional Appraisal Practice (USPAP) from accepting an appraisal assignment subject to hitting a desired value. We are also bound by the ethical provisions within USPAP which guarantees our customers the highest level of confidentiality and discretion. In addition, we provide you with comprehensive appraisal reports that meet or exceed requirements of lenders, the IRS, courts and other various agencies.
Working with Aladdin Appraisal rest assured that you will get the best in professional service and courtesy, while also receiving the highest quality appraisal reports. While we cannot guarantee a value that would “work” for PMI removal our team of exceptional appraisers will take no shortcuts in the research and comparable verification stages which can lead to comparables and other data that is expected when you hire a top quality appraiser.
Our Senior Staff Appraiser, Adam Wiener, CRA will complete or personally review your appraisal. Our extensive experience includes dealing with local and prestigious law firms in the Greater Boston area. We welcome your telephone inquiries and invite your questions about our process.
Adam Wiener Chief Appraiser, CEO Aladdin Appraisal
Greater Boston's go-to Appraiser for Divorce, Estate & Financial Planning, Date of Death, Bankruptcy, PMI Removal, Tax Assessment Appeal, Pre-listing, FSBO & more
More from this blog on: Craig Barber - Fairway Mortgage