CAS Appraisal Services, LLC can help you remove your Private Mortgage InsuranceIt's generally inferred that a 20% down payment is common when buying a house. The lender's only exposure is often just the remainder between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser is unable to pay.
During the recent mortgage boom that our country recently experienced, it was customary to see lenders making deals with down payments of 10, 5 or often 0 percent. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower defaults on the loan and the value of the home is less than what is owed on the loan.
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 is costly to a borrower. It's advantageous for the lender because they acquire the money, and they receive payment if the borrower defaults, in contrast to a piggyback loan where the lender takes in all the damages.
How buyers can avoid bearing the cost of PMIAs a result of The Homeowners Protection Act of 1998, lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, acute home owners can get off the hook sooner than expected.
It can take several years to arrive at the point where the principal is just 80% of the original amount borrowed, so it's important to know how your Florida home has appreciated 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 dropped below the 80% threshold? Even when nationwide trends hint at lower overall home values, understand that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have acquired equity before things declined.
The difficult thing for most consumers to determine is just when their home's equity goes over the 20% point. An accredited, Florida licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At CAS Appraisal Services, LLC, we're masters at identifying value trends in The Villages, Pasco County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally drop the PMI with little effort. 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: