Holmes Appraisals can help you remove your Private Mortgage InsuranceIt's widely inferred that a 20% down payment is the standard when buying a house. The lender's only risk is generally just the difference between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser doesn't pay.Banks were taking down payments discounted to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the market price of the home is less than the loan balance. Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and on many occasions isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender takes in all the costs, PMI is profitable for the lender because they acquire the money, and they are covered if the borrower doesn't pay.
How home buyers can avoid bearing the cost of PMIWith the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, savvy home owners can get off the hook sooner than expected.Considering it can take many years to arrive at the point where the principal is just 80% of the original loan amount, it's essential to know how your Florida home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not follow national trends and/or your home might have secured equity before the economy cooled off. So even when nationwide trends forecast falling home values, you should realize that real estate is local. A certified, Florida licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Holmes Appraisals, we know when property values have risen or declined. We're masters at determining value trends in Longwood, Seminole County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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