Elite Appraisal Services can help you remove your Private Mortgage InsuranceIt's generally known that a 20% down payment is accepted when purchasing a home. The lender's only exposure is usually just the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value variations on the chance that a purchaser is unable to pay.Lenders were working with down payments discounted to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the value of the property is lower than the balance of the loan. PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. Instead of a piggyback loan where the lender takes in all the deficits, PMI is profitable for the lender because they acquire the money, and they get paid if the borrower defaults.
How can a homeowner keep from paying PMI?The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook sooner than expected.Because it can take several years to get to the point where the principal is just 80% of the initial loan amount, it's essential to know how your Florida home has increased in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends predict decreasing home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home could have acquired equity before things cooled off. A certified, Florida licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Elite Appraisal Services, we're experts at pinpointing value trends in Tallahassee, Leon County, and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At which 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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