Let Ruffino Appraisal Group, LLC. help you decide if you can cancel your PMI
A 20% down payment is typically the standard when purchasing a home. The lender's liability is generally only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value fluctuations on the chance that a borrower defaults.
During the recent mortgage upturn of the last decade, it was common to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added plan protects the lender in the event a borrower is unable to pay on the loan and the market price of the home is lower than what is owed on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, contradictory to a piggyback loan where the lender takes in all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers prevent bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook beforehand. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Considering it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's crucial to know how your home has grown in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends hint at declining home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things settled down.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to understand the market dynamics of their area. At Ruffino Appraisal Group, LLC., we know when property values have risen or declined. We're masters at pinpointing value trends in Margate, Broward County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. 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: