Have equity in your home? Want a lower payment? An appraisal from ATB Appraisals, Inc. can help you get rid of your PMI.A 20% down payment is usually the standard when buying a house. The lender's liability is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and regular value changes in the event a borrower defaults.
During the recent mortgage upturn that our country recently experienced, it became customary to see lenders only asking for down payments of 10, 5 or sometimes 0 percent. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the value of the house is less than what the borrower still owes on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the costs, PMI is lucrative for the lender because they obtain the money, and they receive payment if the borrower defaults.
How can a buyer avoid paying PMI?With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount on nearly all loans. Smart homeowners can get off the hook ahead of time. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take many years to arrive at the point where the principal is only 80% of the initial amount borrowed, so it's important to know how your Florida home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends signify falling home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have secured equity before things declined.
An accredited, Florida licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At ATB Appraisals, Inc., we're experts at determining value trends in Land O Lakes, Pasco 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 often drop the PMI with little trouble. At which 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: