Let Appraisal Alliance Group, LLC help you figure out if you can cancel your PMIA 20% down payment is usually the standard when purchasing a home. The lender's only exposure is often just the difference between the home value and the amount due on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and regular value variations on the chance that a borrower is unable to pay.
The market was taking down payments dropping to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the market price of the house is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they acquire the money, and they receive payment if the borrower doesn't pay, separate from a piggyback loan where the lender consumes all the costs.
How can a homebuyer refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law guarantees that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, acute homeowners can get off the hook a little earlier.
It can take many years to arrive at the point where the principal is only 80% of the original amount of the loan, so it's necessary to know how your Florida home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not conform to national trends and/or your home may have gained equity before things simmered down. So even when nationwide trends hint at a reduction in home values, you should understand that real estate is local.
A certified, Florida licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Appraisal Alliance Group, LLC, we're experts at determining value trends in Melbourne, Brevard County, and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often eliminate 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: