Let TLM Appraisal Services help you learn if you can eliminate your PMI
When buying a house, a 20% down payment is usually the standard. Considering the liability for the lender is often only the remainder between the home value and the sum due on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value variationsin the event a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to manage the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy covers the lender in case a borrower defaults on the loan and the worth of the property is less than the balance of the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the losses, PMI is favorable for the lender because they obtain the money, and they get paid if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can avoid bearing the expense of PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy homeowners can get off the hook ahead of time. The law states that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
Considering it can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends predict declining home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have acquired equity before things calmed down.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At TLM Appraisal Services, we know when property values have risen or declined. We're experts at recognizing value trends in Orlando, Orange County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that 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: