Let Countywide Appraisal help you learn if you can eliminate your PMIIt's largely known that a 20% down payment is the standard when getting a mortgage. Because the liability for the lender is usually only the difference between the home value and the sum due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value variations in the event a purchaser is unable to pay.
During the recent mortgage upturn that our country recently experienced, it became customary to see lenders reducing down payments to 10, 5, 3 or sometimes 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional plan protects the lender in the event a borrower is unable to pay on the loan and the value of the home is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. It's profitable for the lender because they collect the money, and they get paid if the borrower is unable to pay, in contrast to a piggyback loan where the lender takes in all the losses.
How home buyers can avoid paying PMIThe Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy homeowners can get off the hook ahead of time. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
Because it can take a significant number of years to reach the point where the principal is only 80% of the original amount of the loan, it's crucial to know how your Florida home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends forecast lower overall home values, realize that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have acquired equity before things declined.
An accredited, Florida licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Countywide Appraisal, we're experts at determining value trends in Clearwater, Pinellas 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 generally remove the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: