Have equity in your home? Want a lower payment? An appraisal from Elite Appraisal, Inc. can help you get rid of your PMI.When purchasing a home, a 20% down payment is typically the standard. The lender's only exposure is typically just the difference between the home value and the balance due on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations in the event a borrower is unable to pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders only asking for down payments of 10, 5 or even 0 percent. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender in the event a borrower defaults on the loan and the market price of the house is lower than the loan balance.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible. It's beneficial for the lender because they acquire the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender absorbs all the costs.
How can home owners keep from paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on nearly all loans. Wise home owners can get off the hook a little earlier. The law states that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.
Since it can take a significant number of years to get to the point where the principal is only 80% of the original amount borrowed, it's necessary to know how your Florida home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends predict falling home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have acquired equity before things declined.
An accredited, Florida licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Elite Appraisal, Inc., we're masters at pinpointing value trends in Miami, Miami-Dade County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often drop 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: