Have equity in your home? Want a lower payment? An appraisal from Barefoot Appraisal Co. can help you get rid of your PMI.A 20% down payment is usually the standard when getting a mortgage. The lender's liability is usually only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value changes on the chance that a borrower is unable to pay.During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders making deals with down payments of 10, 5, 3 or sometimes 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower defaults on the loan and the value of the house is less than what the borrower still owes on the loan. PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible. As opposed to a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they collect the money, and they get paid if the borrower doesn't pay.
How homebuyers can prevent bearing the expense of PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on most loans. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, keen homeowners can get off the hook a little earlier.Considering it can take several years to get to the point where the principal is only 80% of the original amount of the loan, it's essential to know how your Florida home has appreciated in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends forecast falling home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have acquired equity before things declined. An accredited, 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. As appraisers, it's our job to keep up with the market dynamics of our area. At Barefoot Appraisal Co., we know when property values have risen or declined. We're experts at determining value trends in Key West, Monroe County, and surrounding areas. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little effort. At which time, the home owner can relish 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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