Let Compass Appraisal help you discover if you can get rid of your PMIA 20% down payment is usually the standard when getting a mortgage. The lender's risk is oftentimes only the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser is unable to pay.The market was taking down payments dropping to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the value 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 on many occasions isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender consumes all the damages, PMI is profitable for the lender because they collect the money, and they receive payment if the borrower doesn't pay.
How can a homeowner avoid paying PMI?The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, savvy home owners can get off the hook a little earlier.Since it can take several years to reach the point where the principal is only 80% of the original loan amount, it's crucial to know how your Florida home has grown in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not conform to national trends and/or your home might have secured equity before the economy declined. So even when nationwide trends indicate decreasing home values, you should understand that real estate is local. 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. As appraisers, it's our job to recognize the market dynamics of our area. At Compass Appraisal, we know when property values have risen or declined. We're experts at pinpointing value trends in Crawfordville, Wakulla County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At that 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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