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.
When purchasing a home, a 20% down payment is typically the standard. The lender's liability is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and typical value fluctuations on the chance that a purchaser defaults.
During the recent mortgage boom of the last decade, it was customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan guards the lender in the event a borrower defaults on the loan and the value of the home is less than the balance of the loan.
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 often isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they obtain the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can refrain from bearing the cost of PMI
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart home owners can get off the hook a little earlier. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends predict plummeting home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have gained equity before things settled down.
The hardest thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to keep up with the market dynamics of their area. At Appraisal Services of Brandon, Inc ., we know when property values have risen or declined. We're masters at identifying value trends in Valrico, Hillsborough County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often remove the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: