COMSTATE COMPANY can help you remove your Private Mortgage Insurance
It's generally known that a 20% down payment is the standard when getting a mortgage. The lender's liability is oftentimes only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and regular value variations on the chance that a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan takes care of the lender in case a borrower defaults on the loan and the value of the house is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI can be costly to a borrower. Unlike a piggyback loan where the lender takes in all the deficits, PMI is favorable for the lender because they collect the money, and they get the money 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 can home buyers prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise home owners can get off the hook sooner than expected. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to get to the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends hint at decreasing home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things simmered down.
The hardest thing for many homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It is an appraiser's job to recognize the market dynamics of their area. At COMSTATE COMPANY, we're experts at identifying value trends in Sunrise, 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 most often drop the PMI with little effort. At that 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: