Let Integrity Appraisers and Consultants help you decide if you can eliminate your PMIA 20% down payment is usually the standard when getting a mortgage. The lender's risk is often only the difference between the home value and the balance outstanding on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value variations in the event a borrower is unable to pay.During the recent mortgage upturn of the last decade, it became widespread to see lenders making deals with down payments of 10, 5, 3 or sometimes 0 percent. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy guards the lender if a borrower is unable to pay on the loan and the value of the house is lower than what the borrower still owes on the loan. Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they secure the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender absorbs all the costs.
How can homeowners refrain from bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, smart home owners can get off the hook sooner than expected.It can take a significant number of years to arrive at the point where the principal is only 80% of the initial amount of the loan, so it's essential to know how your Florida home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not conform to national trends and/or your home could have secured equity before things simmered down. So even when nationwide trends hint at a reduction in home values, you should realize that real estate is local. An accredited, Florida licensed real estate appraiser can help home owners figure out 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 Integrity Appraisers and Consultants, we're masters at analyzing value trends in Port Salerno, Martin 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 usually eliminate the PMI with little anxiety. At that time, the home owner can enjoy 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
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