Have equity in your home? Want a lower payment? An appraisal from ADK Appraisal Services can help you get rid of your PMI.It's largely known that a 20% down payment is common when buying a house. The lender's only exposure is generally just the remainder between the home value and the balance outstanding on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value variations in the event a purchaser defaults.During the recent mortgage boom that our country recently experienced, it became common to see lenders reducing down payments to 10, 5 or sometimes 0 percent. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy guards the lender if a borrower defaults on the loan and the market price of the property is lower than the loan balance. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI can be costly to a borrower. Unlike a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they collect the money, and they get the money if the borrower is unable to pay.
How homeowners can avoid paying PMIThe Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy homeowners can get off the hook a little early. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.Since it can take many years to reach the point where the principal is only 80% of the original amount borrowed, it's essential to know how your Florida home has increased in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not adhere to national trends and/or your home could have gained equity before the economy cooled off. So even when nationwide trends forecast declining home values, you should know most importantly that real estate is local. The hardest thing for many homeowners to figure out is whether their home equity has exceeded the 20% point. A certified, Florida licensed real estate appraiser can certainly help. It's an appraiser's job to keep up with the market dynamics of their area. At ADK Appraisal Services, we're experts at analyzing value trends in Oviedo, Seminole 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 most often do away with the PMI with little trouble. 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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