Let Canopy Roads Appraisal, LLC help you discover if you can cancel your PMIA 20% down payment is usually the standard when purchasing a home. Because the liability for the lender is often only the remainder between the home value and the sum due on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and regular value changes in the event a borrower defaults.During the recent mortgage boom that our country recently experienced, it became customary to see lenders only asking for down payments of 10, 5, 3 or often 0 percent. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy covers the lender in case a borrower defaults on the loan and the market price of the house is less than the loan balance. Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender takes in all the deficits, PMI is money-making for the lender because they obtain the money, and they get the money if the borrower doesn't pay.
How can a homebuyer refrain from bearing the expense of PMI?As a result of The Homeowners Protection Act of 1998, lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. Savvy home owners can get off the hook beforehand. The law guarantees that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.It can take a significant number of years to reach the point where the principal is just 80% of the original amount of the loan, so it's crucial to know how your Florida home has grown in value. After all, all of the appreciation you've gained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends predict lower overall home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things declined. The difficult thing for most consumers to determine is whether their home equity has exceeded the 20% point. A certified, Florida licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At Canopy Roads Appraisal, LLC, we're masters at determining value trends in Tallahassee, Leon County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At which time, the home owner can retain 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
|
||||||||||||||||||
