Let TrueValue I, Inc. help you decide if you can eliminate your PMIWhen purchasing a home, a 20% down payment is typically the standard. Because the liability for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and typical value changes in the event a borrower defaults.The market was taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the market price 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 frequently isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they secure the money, and they receive payment if the borrower doesn't pay, in contrast to a piggyback loan where the lender absorbs all the losses.
How home buyers can keep from bearing the cost of PMIThe Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart home owners can get off the hook a little earlier.Because it can take many years to get to the point where the principal is only 80% of the original loan amount, it's important to know how your Florida home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends forecast declining home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have acquired equity before things simmered down. The hardest thing for almost all homeowners to determine is just when their home's equity goes over the 20% point. A certified, Florida licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our area. At TrueValue I, Inc., we're masters at analyzing value trends in Mary Esther, Okaloosa 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 often do away with the PMI with little effort. 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
|
||||||||||||||||||
