Carvalho & Associates Appraisal Corp can help you remove your Private Mortgage InsuranceIt's typically understood that a 20% down payment is the standard when buying a house. Considering the risk for the lender is oftentimes only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and typical value variations in the event a purchaser doesn't pay.During the recent mortgage upturn that our country recently experienced, it was widespread to see lenders reducing down payments to 10, 5 or even 0 percent. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan protects the lender if a borrower is unable to pay on the loan and the market price of the property is lower than the loan balance. Because the $40-$70 a month per $100,000 borrowed is lumped into the mortgage payment and on many occasions isn't even tax deductible, PMI is pricey to a borrower. As opposed to a piggyback loan where the lender absorbs all the damages, PMI is money-making for the lender because they acquire the money, and they get the money if the borrower defaults.
How homeowners can prevent bearing the cost of PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on most loans. Savvy home owners can get off the hook ahead of time. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.Considering it can take many years to reach the point where the principal is just 80% of the initial loan amount, it's essential to know how your Florida home has grown in value. After all, all of the appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not conform to national trends and/or your home might have acquired equity before things cooled off. So even when nationwide trends hint at a reduction in home values, you should know most importantly that real estate is local. The hardest thing for most homeowners to determine is whether their home equity has exceeded the 20% point. A certified, Florida licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At Carvalho & Associates Appraisal Corp, we know when property values have risen or declined. We're masters at identifying value trends in Davie, Broward County, and surrounding areas. When faced with information from an appraiser, the mortgage company will most often remove the PMI with little effort. At which time, the home owner can relish 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
|
||||||||||||||||||
