Ruffino Appraisal Group, LLC. can help you remove your Private Mortgage InsuranceA 20% down payment is usually the standard when buying a house. Considering the risk for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser is unable to pay.
During the recent mortgage upturn that our country recently experienced, it was common to see lenders reducing down payments to 10, 5, 3 or sometimes 0 percent. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan covers the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. It's profitable for the lender because they collect the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender takes in all the deficits.
How can a home buyer avoid bearing the cost of PMI?The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Keen homeowners can get off the hook a little earlier. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take a significant number of years to reach the point where the principal is just 80% of the original amount borrowed, it's important to know how your Florida home has increased in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends hint at declining home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home might have secured equity before things simmered down.
The difficult thing for almost all people to figure out is just when their home's equity rises above the 20% point. An accredited, Florida licensed real estate appraiser can certainly help. It's an appraiser's job to recognize the market dynamics of their area. At Ruffino Appraisal Group, LLC., we're masters at recognizing value trends in Margate, Broward County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that 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: