Have equity in your home? Want a lower payment? An appraisal from Appraisal Services of Brandon, Inc . can help you get rid of your PMI.
A 20% down payment is usually accepted when getting a mortgage. Since the liability for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and typical value variationsin the event a purchaser is unable to pay.
Lenders were taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender in the event a borrower is unable to pay on the loan and the market price of the house is lower than the balance of the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. It's money-making for the lender because they obtain the money, and they get paid if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer prevent bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen home owners can get off the hook beforehand. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take many years to get to the point where the principal is only 20% of the original loan amount, so it's important to know how your home has increased in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends hint at decreasing home values, understand that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have gained equity before things settled down.
The toughest thing for most homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to know the market dynamics of our area. At Appraisal Services of Brandon, Inc ., we're experts at determining value trends in Valrico, Hillsborough County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: