AAA Appraisal, Inc. can help you remove your Private Mortgage InsuranceIt's widely inferred that a 20% down payment is the standard when purchasing a home. Since the risk for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser is unable to pay.
The market was taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. This additional policy covers the lender if a borrower defaults on the loan and the market price of the house is less than what is owed on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and on many occasions isn't even tax deductible. It's profitable for the lender because they acquire the money, and they are covered if the borrower defaults, in contrast to a piggyback loan where the lender absorbs all the costs.
How can home owners refrain from paying PMI?With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, keen homeowners can get off the hook ahead of time.
It can take a significant number of years to get to the point where the principal is just 80% of the initial amount borrowed, so it's important to know how your Florida home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends signify falling home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have acquired equity before things declined.
The toughest thing for most people to determine is whether their home equity has exceeded the 20% point. A certified, Florida licensed real estate appraiser can definitely help. It is an appraiser's job to recognize the market dynamics of their area. At AAA Appraisal, Inc., we're masters at analyzing value trends in FORT PIERCE, Saint Lucie 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 generally cancel the PMI with little trouble. At which time, the home owner can retain the savings from that point on.
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