Superstar Appraisal Services can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is typically the standard. Because the liability for the lender is usually only the remainder 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 natural value changes on the chance that a purchaser defaults.
The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the market price of the house is lower than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. It's money-making for the lender because they obtain the money, and they get the money if the borrower defaults, different from a piggyback loan where the lender takes in all the deficits.
How can a homeowner keep from paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on nearly all loans. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, keen home owners can get off the hook a little earlier.
Since it can take many years to arrive at the point where the principal is just 80% of the initial loan amount, it's important to know how your Florida home has grown in value. After all, any appreciation you've achieved over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not follow national trends and/or your home may have acquired equity before the economy simmered down. So even when nationwide trends predict decreasing home values, you should realize that real estate is local.
The difficult thing for almost all homeowners to figure out is whether their home equity has exceeded the 20% point. A certified, Florida licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Superstar Appraisal Services, we know when property values have risen or declined. We're experts at pinpointing value trends in West Palm Beach, Palm Beach County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually do away with 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: