Have equity in your home? Want a lower payment? An appraisal from SAVVY Realty & Appraisals can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is generally only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser defaults.
Lenders were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the worth of the property is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Contradictory to a piggyback loan where the lender takes in all the costs, PMI is lucrative for the lender because they secure the money, and they get the money if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can refrain from paying PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, acute home owners can get off the hook sooner than expected.
It can take many years to arrive at the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends hint at falling home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have gained equity before things calmed down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At SAVVY Realty & Appraisals, we're experts at identifying value trends in Longwood, Seminole 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 eliminate the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: