Let Pomeroy Appraisal Associates of Florida Inc. help you decide if you can get rid of your PMIA 20% down payment is usually accepted when getting a mortgage. The lender's only risk is usually just the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and regular value changes on the chance that a borrower defaults.During the recent mortgage boom of the mid 2000s, it was customary to see lenders making deals with down payments of 10, 5, 3 or often 0 percent. A lender is able to handle the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the value of the property is less than the balance of the loan. Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible, PMI can be pricey to a borrower. It's advantageous for the lender because they secure the money, and they are covered if the borrower defaults, as opposed to a piggyback loan where the lender absorbs all the damages.
How can a home buyer prevent bearing the cost of PMI?The Homeowners Protection Act of 1998 makes the lenders on the majority of loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Keen homeowners can get off the hook sooner than expected. The law designates that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.It can take many years to reach the point where the principal is only 80% of the initial loan amount, so it's crucial to know how your Florida home has appreciated in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home could have acquired equity before things cooled off. So even when nationwide trends forecast decreasing home values, you should understand that real estate is local. An accredited, Florida licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Pomeroy Appraisal Associates of Florida Inc., we're masters at identifying value trends in Volusia County, and surrounding county areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually drop the PMI with little effort. At that time, the home owner can enjoy 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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