Aurora Appraisal Services can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is usually the standard. Considering the liability for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value variations on the chance that a borrower is unable to pay.During the recent mortgage boom of the last decade, it became customary to see lenders reducing down payments to 10, 5 or even 0 percent. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. This additional plan takes care of the lender if a borrower defaults on the loan and the market price of the property is lower than what the borrower still owes on the loan. Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. It's advantageous for the lender because they acquire the money, and they get paid if the borrower is unable to pay, in contrast to a piggyback loan where the lender takes in all the damages.
How can a homebuyer refrain from bearing the cost of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount on nearly all loans. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, smart homeowners can get off the hook sooner than expected.Because it can take many years to arrive at the point where the principal is just 80% of the original amount borrowed, it's essential to know how your Florida home has increased in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict falling home values, realize that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have secured equity before things simmered down. A certified, Florida licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Aurora Appraisal Services, we know when property values have risen or declined. We're experts at analyzing value trends in Sarasota, Sarasota County, and surrounding areas. When faced with information from an appraiser, the mortgage company will often cancel the PMI with little effort. At that 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
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