Have equity in your home? Want a lower payment? An appraisal from Ruffino Appraisal Group, LLC. can help you get rid of your PMI.
It's largely inferred that a 20% down payment is accepted when purchasing a home. The lender's liability is often only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value fluctuations in the event a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. This added policy covers the lender in case a borrower defaults on the loan and the market price of the home is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible, PMI is costly to a borrower. It's beneficial for the lender because they collect the money, and they get paid if the borrower doesn't pay, opposite from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners avoid paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen homeowners can get off the hook a little early. The law stipulates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take many years to reach the point where the principal is just 20% of the initial amount borrowed, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home might have acquired equity before things simmered down, so even when nationwide trends forecast declining home values, you should understand that real estate is local.
The difficult thing for most home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our area. At Ruffino Appraisal Group, LLC., we're experts at analyzing value trends in Margate, Broward 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 generally drop the PMI with little effort. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: