Have equity in your home? Want a lower payment? An appraisal from Lighthouse Appraisal can help you get rid of your PMI.A 20% down payment is usually accepted when purchasing a home. Since the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and regular value changes in the event a borrower doesn't pay.
The market was taking down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender if a borrower is unable to pay on the loan and the value of the property is lower than what the borrower still owes on the loan.
Since 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, PMI can be pricey to a borrower. It's beneficial for the lender because they acquire the money, and they get the money if the borrower doesn't pay, separate from a piggyback loan where the lender absorbs all the deficits.
How can a buyer prevent bearing the expense of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on most loans. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent. So, savvy homeowners can get off the hook sooner than expected.
It can take many years to arrive at the point where the principal is just 80% of the initial amount borrowed, so it's crucial to know how your Florida home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not conform to national trends and/or your home may have acquired equity before the economy declined. So even when nationwide trends forecast a reduction in home values, you should understand that real estate is local.
The toughest thing for many people to figure out is whether their home equity has exceeded the 20% point. A certified, Florida licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Lighthouse Appraisal, we know when property values have risen or declined. We're experts at identifying value trends in Cocoa Beach, Brevard County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will often drop the PMI with little effort. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: