Let A.M.O. Appraisals, Inc. help you learn if you can eliminate your PMIWhen purchasing a home, a 20% down payment is typically the standard. The lender's risk is often only the remainder between the home value and the balance remaining on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuations in the event a borrower is unable to pay.During the recent mortgage boom of the mid 2000s, it became customary to see lenders reducing down payments to 10, 5, 3 or even 0 percent. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan guards the lender if a borrower doesn't pay on the loan and the market price of the house is less than the balance of the loan. Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI is pricey to a borrower. Instead of a piggyback loan where the lender takes in all the costs, PMI is money-making for the lender because they acquire the money, and they are covered if the borrower defaults.
How can a buyer refrain from paying PMI?As a result of The Homeowners Protection Act of 1998, lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on most loans. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook a little early.It can take several years to get to the point where the principal is just 80% of the initial amount borrowed, so it's crucial to know how your Florida home has grown in value. After all, any appreciation you've gained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends indicate declining home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things cooled off. The difficult thing for most consumers to figure out is whether their home equity has exceeded 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 A.M.O. Appraisals, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Naples, Collier County, and surrounding areas. When faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At which time, the homeowner can relish 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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