R.E. Analysts - Residential, LLC. can help you remove your Private Mortgage InsuranceIt's largely known that a 20% down payment is the standard when buying a house. Because the risk for the lender is generally only the difference between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value variations in the event a purchaser doesn't pay.Banks were working with down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender in case a borrower is unable to pay on the loan and the value of the property is lower than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they secure the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender consumes all the deficits.
How buyers can avoid bearing the cost of PMIThe Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, wise home owners can get off the hook sooner than expected.It can take several years to arrive at the point where the principal is only 80% of the original amount borrowed, so it's important to know how your Florida home has appreciated in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home might have gained equity before the economy cooled off. So even when nationwide trends predict a reduction in home values, you should understand that real estate is local. A certified, Florida licensed real estate appraiser can help homeowners figure out if their equity has made it to 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 R.E. Analysts - Residential, LLC., we know when property values have risen or declined. We're experts at determining value trends in Fort Lauderdale, Broward County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often drop the PMI with little trouble. At which 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: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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