Have equity in your home? Want a lower payment? An appraisal from DANIEL I KANDEL can help you get rid of your PMI.
It's typically understood that a 20% down payment is accepted when getting a mortgage. Because the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuationson the chance that a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became widespread to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the market price of the home is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. Separate from a piggyback loan where the lender consumes all the damages, PMI is favorable for the lender because they acquire the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home owners can avoid bearing the expense of PMI
The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy homeowners can get off the hook a little early. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
Because it can take countless years to arrive at the point where the principal is just 20% of the initial amount borrowed, it's crucial to know how your home has grown in value. After all, any appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends hint at plunging home values, you should understand that real estate is local.
The hardest thing for most homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At DANIEL I KANDEL, we're experts at pinpointing value trends in Weston/Ft. Lauderdale, Broward County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: