Have equity in your home? Want a lower payment? An appraisal from Personal Service Realty's Residential Valuation Group can help you get rid of your PMI.
When buying a house, a 20% down payment is typically the standard. Because the risk for the lender is often only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value variationson the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it became common to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the value of the house is lower than what the borrower still owes on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the costs, PMI is favorable for the lender because they secure the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can prevent bearing the cost of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart home owners can get off the hook sooner than expected. The law promises that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount borrowed, so it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends indicate falling home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home could have gained equity before things settled down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At Personal Service Realty's Residential Valuation Group, we're experts at identifying value trends in Jacksonville, Duval County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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