Have equity in your home? Want a lower payment? An appraisal from Anglum Appraisal can help you get rid of your PMI.When purchasing a home, a 20% down payment is usually the standard. Considering the liability for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and regular value variations in the event a borrower is unable to pay.
Banks were working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan covers the lender in the event a borrower defaults on the loan and the value of the property is lower than what the borrower still owes on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the losses, PMI is favorable for the lender because they collect the money, and they receive payment if the borrower is unable to pay.
How can a home buyer avoid paying PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, wise homeowners can get off the hook sooner than expected.
Considering it can take a significant number of years to arrive at the point where the principal is just 80% of the initial amount borrowed, it's crucial to know how your Florida home has grown in value. After all, all of the appreciation you've gained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends forecast falling home values, be aware that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have secured equity before things cooled off.
The difficult thing for many 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 Anglum Appraisal, we're masters at identifying value trends in Jensen Beach, Stone County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually remove the PMI with little effort. At that time, the homeowner can relish the savings from that point on.
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