Personal Service Realty's Residential Valuation Group can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. Since the liability for the lender is generally only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and natural value variationsin the event a borrower doesn't pay.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. This supplemental policy protects the lender in the event a borrower doesn't pay on the loan and the market price of the home is lower than the loan balance.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is money-making for the lender because they acquire the money, and they receive payment if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook a little early.
Since it can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's important to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends forecast falling home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Personal Service Realty's Residential Valuation Group, we're masters at identifying value trends in Jacksonville, Duval County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often drop the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.