Let Moore Appraisals, Inc help you discover if you can eliminate your PMIWhen getting a mortgage, a 20% down payment is typically the standard. The lender's only risk is generally just the remainder between the home value and the balance remaining on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser doesn't pay.During the recent mortgage upturn of the mid 2000s, it was customary to see lenders only asking for down payments of 10, 5, 3 or sometimes 0 percent. How does a lender endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional plan covers the lender if a borrower defaults on the loan and the value of the property is less than the loan balance. Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. It's favorable for the lender because they obtain the money, and they are covered if the borrower is unable to pay, different from a piggyback loan where the lender consumes all the losses.
How can home owners prevent bearing the cost of PMI?The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart homeowners can get off the hook ahead of time. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.Considering it can take many years to reach the point where the principal is only 80% of the original amount borrowed, it's important to know how your Florida home has appreciated in value. After all, any appreciation you've acquired over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends forecast decreasing home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have secured equity before things declined. The hardest thing for many consumers to figure out is just when their home's equity goes over the 20% point. A certified, Florida licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At Moore Appraisals, Inc, we know when property values have risen or declined. We're masters at pinpointing value trends in Tavares, Lake County, and surrounding areas. When faced with data from an appraiser, the mortgage company will often eliminate the PMI with little effort. At which time, the home owner 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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