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Let Personal Service Realty's Residential Valuation Group help you learn if you can eliminate your PMI
When purchasing a home, a 20% down payment is usually the standard.
The lender's risk is oftentimes only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuations in the event a borrower doesn't pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders making deals with down payments of 10, 5, 3 or sometimes 0 percent.
How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI.
PMI protects the lender if a borrower is unable to pay on the loan and the market price of the property is lower than what the borrower still owes on the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible.
It's advantageous for the lender because they collect the money, and they get the money if the borrower doesn't pay, separate from a piggyback loan where the lender absorbs all the losses.
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Is PMI included in your monthly house payment? Call Personal Service Realty's Residential Valuation Group today at 904 563-3063 or send us an e-mail. Documentation of your home's present value could save you thousands.
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How can a homebuyer keep from paying PMI?
With the passage of The Homeowners Protection Act of 1998, lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on most loans.
The law pledges that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, keen homeowners can get off the hook sooner than expected.
It can take many years to arrive at the point where the principal is just 80% of the original loan amount, so it's crucial to know how your Florida home has grown in value.
After all, all of the appreciation you've acquired over time counts towards removing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold?
Even when nationwide trends predict lower overall home values, understand that real estate is local. Your neighborhood might not be adopting the national trends and/or your home might have gained equity before things declined.
An accredited, Florida licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a hard thing to know.
It is an appraiser's job to recognize the market dynamics of their area.
At Personal Service Realty's Residential Valuation Group, we know when property values have risen or declined. We're experts at pinpointing value trends in Jacksonville, Duval County, and surrounding areas.
Faced with data from an appraiser, the mortgage company will usually cancel the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
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Did you have less than 20% to put down on your mortgage? Contact Personal Service Realty's Residential Valuation Group today at 904 563-3063. You may be able to save money by removing your Private Mortgage Insurance payment.
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Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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