Have equity in your home? Want a lower payment? An appraisal from Personal Service Realty's Residential Valuation Group can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. Since the risk for the lender is usually only the difference between the home value and the sum due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuationsin the event a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it became customary to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower is unable to pay on the loan and the market price of the property is less than the balance of the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they collect the money, and they receive payment if the borrower doesn't pay.
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 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Wise homeowners can get off the hook beforehand. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
Because it can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends forecast plunging home values, you should understand that real estate is local.
The toughest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to recognize the market dynamics of their area. At Personal Service Realty's Residential Valuation Group, we know when property values have risen or declined. We're experts at pinpointing value trends in Jacksonville, Duval County and surrounding areas. Faced with information from an appraiser, the mortgage company will often remove the PMI with little trouble. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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