Let Ellis Appraisal Services, Inc. help you discover if you can get rid of your PMIWhen buying a house, a 20% down payment is typically the standard. Because the liability for the lender is generally only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders only asking for down payments of 10, 5 or even 0 percent. A lender is able to endure the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the market price of the property is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes 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 receive payment if the borrower is unable to pay, as opposed to a piggyback loan where the lender consumes all the losses.
How homeowners can avoid bearing the expense of PMIThe Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Smart homeowners can get off the hook a little early. The law stipulates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take several years to reach the point where the principal is only 80% of the initial loan amount, so it's necessary to know how your Florida home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not follow national trends and/or your home could have gained equity before things simmered down. So even when nationwide trends signify falling home values, you should realize that real estate is local.
The toughest thing for many consumers to figure out is just when their home's equity rises above the 20% point. An accredited, Florida licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At Ellis Appraisal Services, Inc., we're masters at determining value trends in Apopka, Orange County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At which time, the homeowner can delight in the savings from that point on.
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