Houston Appraisal Services, Inc. can help you remove your Private Mortgage InsuranceWhen buying a house, a 20% down payment is usually the standard. Because the liability for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and regular value fluctuations in the event 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 endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the value of the house is less than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they are covered if the borrower is unable to pay, different from a piggyback loan where the lender absorbs all the losses.
How can a buyer refrain from bearing the cost of PMI?The Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute home owners can get off the hook sooner than expected. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take several years to get to the point where the principal is just 80% of the original amount borrowed, so 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 abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood may not conform to national trends and/or your home could have acquired equity before things simmered down. So even when nationwide trends signify declining home values, you should understand that real estate is local.
An accredited, Florida certified residential real estate appraiser can help homeowners figure out if their equity has made it to the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Houston Appraisal Services, Inc., we're experts at determining value trends in Mary Esther, Okaloosa County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
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