Home Value Inc. can help you remove your Private Mortgage InsuranceWhen purchasing a home, a 20% down payment is typically the standard. The lender's only liability is usually just the difference between the home value and the amount due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value changes in the event a purchaser doesn't pay.During the recent mortgage upturn that our country recently experienced, it became customary to see lenders reducing down payments to 10, 5, 3 or sometimes 0 percent. How does a lender endure the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the market price of the property is lower than what is owed on the loan. Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI can be expensive to a borrower. It's advantageous for the lender because they obtain the money, and they are covered if the borrower doesn't pay, as opposed to a piggyback loan where the lender absorbs all the deficits.
How can a home owner keep from bearing the cost of PMI?The Homeowners Protection Act of 1998 requires the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, savvy home owners can get off the hook a little early.Because it can take many years to arrive at the point where the principal is just 80% of the original amount borrowed, it's crucial to know how your Florida home has appreciated in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends predict declining home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have gained equity before things simmered down. The difficult thing for many homeowners to figure out is whether their home equity has exceeded the 20% point. A certified, Florida licensed real estate appraiser can surely help. It's an appraiser's job to understand the market dynamics of their area. At Home Value Inc., we know when property values have risen or declined. We're experts at recognizing value trends in Miami Springs, Miami-Dade County, and surrounding areas. Faced with information from an appraiser, the mortgage company will usually remove the PMI with little effort. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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