DANIEL I KANDEL can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. The lender's risk is often only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser doesn't pay.
Banks were working with down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the value of the home is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. It's favorable for the lender because they acquire the money, and they get paid if the borrower doesn't pay, separate from 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 homeowners keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy home owners can get off the hook a little early. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Despite the fact that nationwide trends indicate plummeting home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have gained equity before things settled down.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At DANIEL I KANDEL, we're masters at recognizing value trends in Weston/Ft. Lauderdale, Broward County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: