Appraise It Florida can help you remove your Private Mortgage InsuranceIt's largely inferred that a 20% down payment is common when buying a house. The lender's risk is usually only the difference between the home value and the sum outstanding on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and typical value changes in the event a purchaser doesn't pay.
Banks were working with down payments dropping to 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. This added plan protects the lender in case 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.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible. It's advantageous for the lender because they secure the money, and they receive payment if the borrower defaults, in contrast to a piggyback loan where the lender absorbs all the costs.
How homebuyers can avoid paying PMIThe Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, smart home owners can get off the hook sooner than expected.
It can take several years to reach the point where the principal is only 80% of the original amount borrowed, so it's important to know how your Florida home has increased in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not follow national trends and/or your home might have secured equity before things cooled off. So even when nationwide trends forecast declining home values, you should know most importantly that real estate is local.
The toughest thing for many consumers to determine is whether their home equity has exceeded the 20% point. An accredited, Florida licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At Appraise It Florida, we're experts at identifying value trends in Brooksville, Hernando 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 most often drop the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: