Let DANIEL I KANDEL help you learn if you can eliminate your PMI
When buying a house, a 20% down payment is typically the standard. The lender's risk is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and natural value variations on the chance that a borrower defaults.
Lenders were working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy guards the lender if a borrower defaults on the loan and the market price of the house is lower than what the borrower still owes on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they acquire the money, and they get paid if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Savvy home owners can get off the hook sooner than expected. The law designates that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Since it can take countless years to get to the point where the principal is only 20% of the original loan amount, it's important to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends predict falling home values, be aware that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have acquired equity before things cooled off.
The toughest thing for almost all home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At DANIEL I KANDEL, we know when property values have risen or declined. We're experts at analyzing value trends in Weston/Ft. Lauderdale, Broward County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally do away with the PMI with little effort. At which 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: