Let First Choice Appraisal Services, Inc. help you decide if you can get rid of your PMIIt's widely known that a 20% down payment is common when buying a house. The lender's risk is oftentimes only the remainder between the home value and the balance outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value variations on the chance that a purchaser is unable to pay.
The market was taking down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added plan covers the lender if a borrower is unable to pay on the loan and the value of the home is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender consumes all the costs, PMI is beneficial for the lender because they secure the money, and they receive payment if the borrower is unable to pay.
How home owners can avoid paying PMIWith the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on nearly all loans. Savvy home owners can get off the hook sooner than expected. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
Because it can take a significant number of years to get to the point where the principal is only 80% of the initial amount of the loan, it's crucial 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 what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not follow national trends and/or your home may have secured equity before the economy simmered down. So even when nationwide trends predict decreasing home values, you should realize that real estate is local.
The toughest thing for most people to figure out is whether their home equity has exceeded the 20% point. A certified, Florida licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At First Choice Appraisal Services, Inc., we know when property values have risen or declined. We're experts at determining value trends in Lake Worth, Palm Beach County, and surrounding areas. Faced with information from an appraiser, the mortgage company will usually do away with the PMI with little effort. At that time, the home owner can relish the savings from that point on.
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