Performance Appraisals Inc. can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. The lender's liability is usually only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value variations on the chance that a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy protects the lender if a borrower is unable to pay on the loan and the worth of the property 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 bundled into the mortgage monthly payment and generally isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers avoid bearing the expense of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy homeowners can get off the hook sooner than expected. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Because it can take many years to reach the point where the principal is just 20% of the original amount of the loan, it's necessary to know how your home has increased in value. After all, every bit of appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends indicate plunging home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things cooled off.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At Performance Appraisals Inc., we're masters at analyzing value trends in Ponte Vedra Beach, Saint Johns County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally do away with the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: