Ancient City Appraisals can help you remove your Private Mortgage InsuranceWhen buying a house, a 20% down payment is usually the standard. Since the liability for the lender is usually only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and typical value changes in the event a borrower defaults.Banks were accepting down payments discounted to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy takes care of the lender in case a borrower doesn't pay on the loan and the value of the home is less than the loan balance. PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's profitable for the lender because they obtain the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the losses.
How can a home owner refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy homeowners can get off the hook a little early. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.It can take several years to reach the point where the principal is just 80% of the original loan amount, so 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 pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends signify falling home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have acquired equity before things simmered down. An accredited, Florida licensed real estate appraiser can help home owners figure out if their equity has made it to the 20% point, as it's a tough thing to know. It's an appraiser's job to know the market dynamics of their area. At Ancient City Appraisals, we know when property values have risen or declined. We're experts at determining value trends in St Augustine, Saint Johns County, and surrounding areas. Faced with information from an appraiser, the mortgage company will often cancel the PMI with little effort. At that time, the home owner can enjoy 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
|
||||||||||||||||||
