Have equity in your home? Want a lower payment? An appraisal from DANIEL I KANDEL can help you get rid of your PMI.
A 20% down payment is usually the standard when getting a mortgage. The lender's risk is generally only the remainder between the home value and the amount due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and natural value changes in the event a borrower defaults.
The market was accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the value of the house is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they obtain the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender takes in 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 homebuyers avoid bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Acute homeowners can get off the hook ahead of time. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.
It can take many years to reach the point where the principal is just 20% of the initial amount of the loan, so it's essential to know how your home has appreciated in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends hint at declining home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have acquired equity before things simmered down.
The hardest thing for many home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At DANIEL I KANDEL, we know when property values have risen or declined. We're experts at determining value trends in Weston/Ft. Lauderdale, Broward County and surrounding areas. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: