Have equity in your home? Want a lower payment? An appraisal from Mark Schofield Appraisal Services can help you get rid of your PMI.
A 20% down payment is typically accepted when purchasing a home. Because the liability for the lender is oftentimes only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and typical value fluctuationsin the event a borrower defaults.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan protects the lender if a borrower is unable to pay on the loan and the market price of the house is lower than what is owed on the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible. It's lucrative for the lender because they secure the money, and they get paid if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can refrain from paying PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law designates that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook a little early.
Because it can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends indicate falling home values, understand that real estate is local. Your neighborhood might not be adopting 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 rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Mark Schofield Appraisal Services , we know when property values have risen or declined. We're experts at determining value trends in St Johns, Saint Johns County and surrounding areas. Faced with information from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: