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. The lender's liability is usually only the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and regular value fluctuations in the event a borrower defaults.
During the recent mortgage boom of the last decade, it was customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender in case a borrower is unable to pay on the loan and the value of the property is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender absorbs all the damages, PMI is advantageous for the lender because they obtain the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can avoid paying PMI
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, smart home owners can get off the hook a little early.
Considering it can take many years to get to the point where the principal is only 20% of the initial loan amount, it's important to know how your home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends predict declining home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Personal Service Realty's Residential Valuation Group, we know when property values have risen or declined. We're masters at recognizing value trends in Jacksonville, Duval County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little effort. 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:
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