Let Mark Harris, help you figure out if you can get rid of your PMIWhen purchasing a home, a 20% down payment is typically the standard. Because the liability for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser is unable to pay.The market was working with down payments dropping to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the market price of the property is less than the loan balance. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. Instead of a piggyback loan where the lender takes in all the losses, PMI is favorable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay.
How can buyers refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy homeowners can get off the hook a little early. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.It can take several years to get to the point where the principal is just 80% of the initial amount borrowed, so it's necessary to know how your Florida home has increased in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not follow national trends and/or your home might have gained equity before things simmered down. So even when nationwide trends signify falling home values, you should understand that real estate is local. An accredited, Florida licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Mark C. Harris, Inc., we know when property values have risen or declined. We're masters at determining value trends in Tavernier, Monroe County, and surrounding areas. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little effort. At which time, the homeowner can delight in 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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