Have equity in your home? Want a lower payment? An appraisal from DANIEL I KANDEL can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is generally only the difference between the home value and the sum due on the loan, so the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and natural value changes on the chance that a borrower defaults.
The market was working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the value of the home is lower than what is owed on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they collect 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 homebuyers can avoid paying PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, smart homeowners can get off the hook a little early.
Considering it can take countless years to reach the point where the principal is only 20% of the initial loan amount, it's important to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be following the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends indicate declining home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At DANIEL I KANDEL, we know when property values have risen or declined. We're masters at analyzing value trends in Weston/Ft. Lauderdale, Broward County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. 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: