Have equity in your home? Want a lower payment? An appraisal from Metro Appraisals can help you get rid of your PMI.It's typically known that a 20% down payment is accepted when getting a mortgage. The lender's liability is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value variations in the event a borrower is unable to pay.
Lenders were accepting down payments discounted to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy guards the lender if a borrower doesn't pay on the loan and the value of the property is less than the balance of the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. It's beneficial for the lender because they acquire the money, and they get the money if the borrower is unable to pay, in contrast to a piggyback loan where the lender absorbs all the costs.
How can a home buyer avoid bearing the expense of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. Savvy home owners can get off the hook ahead of time. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is just 80% of the initial loan amount, so it's crucial to know how your Florida home has appreciated in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood might not conform to national trends and/or your home may have gained equity before the economy simmered down. So even when nationwide trends predict declining home values, you should know most importantly that real estate is local.
An accredited, Florida licensed real estate appraiser can help home owners figure out if their equity has reached the 20% point, as it's a difficult thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Metro Appraisals, we're experts at recognizing value trends in Naples, Collier 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 generally drop 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: