Have equity in your home? Want a lower payment? An appraisal from Valuation Consulting Group can help you get rid of your PMI.It's largely understood that a 20% down payment is common when buying a house. The lender's only risk is typically just the difference between the home value and the balance outstanding on the loan, so the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and typical value variations in the event a purchaser doesn't pay.
The market was working with down payments dropping to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the value of the property is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI can be costly to a borrower. As opposed to a piggyback loan where the lender absorbs all the costs, PMI is beneficial for the lender because they acquire the money, and they are covered if the borrower is unable to pay.
How can a homebuyer keep from paying PMI?With the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount on nearly all loans. Smart home owners can get off the hook a little earlier. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take a significant number of years to arrive at the point where the principal is only 80% of the original amount borrowed, so it's essential to know how your Florida home has increased in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not conform to national trends and/or your home could have acquired equity before things cooled off. So even when nationwide trends predict declining home values, you should know most importantly that real estate is local.
A certified, Florida licensed real estate appraiser can help home owners figure out if their equity has reached the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Valuation Consulting Group, we're masters at pinpointing value trends in Tarpon Springs, Pinellas 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 drop the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.
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