Appraisals Online, Inc can help you remove your Private Mortgage InsuranceIt's largely known that a 20% down payment is the standard when buying a house. The lender's only exposure is typically just the remainder between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value variations in the event a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders only asking for down payments of 10, 5 or often 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. This added policy guards the lender if a borrower is unable to pay on the loan and the market price of the property is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. It's favorable for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender absorbs all the losses.
How can a homebuyer avoid bearing the cost of PMI?The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute home owners can get off the hook sooner than expected.
Because it can take several years to reach the point where the principal is just 80% of the original amount borrowed, it's essential to know how your Florida home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not conform to national trends and/or your home could have acquired equity before things cooled off. So even when nationwide trends signify declining home values, you should understand that real estate is local.
The difficult thing for most consumers to determine is whether their home equity has exceeded the 20% point. An accredited, Florida licensed real estate appraiser can definitely help. It's an appraiser's job to know the market dynamics of their area. At Appraisals Online, Inc, we know when property values have risen or declined. We're masters at identifying value trends in Orlando, Orange County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
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