Appraisal Advisors Group can help you remove your Private Mortgage InsuranceA 20% down payment is usually the standard when getting a mortgage. The lender's only exposure is generally just the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and regular value changes on the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was customary to see lenders making deals with down payments of 10, 5 or even 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the value of the property is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. It's profitable for the lender because they secure the money, and they are covered if the borrower doesn't pay, separate from a piggyback loan where the lender takes in all the costs.
How can buyers prevent paying PMI?As a result of The Homeowners Protection Act of 1998, lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount on nearly all loans. Wise home owners can get off the hook ahead of time. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Because it can take a significant number of years to arrive at the point where the principal is only 80% of the initial loan amount, it's essential to know how your Puerto Rico home has grown in value. After all, all of the appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood might not follow national trends and/or your home may have secured equity before things declined. So even when nationwide trends hint at declining home values, you should know most importantly that real estate is local.
An accredited, Puerto Rico licensed real estate appraiser can help homeowners figure out if their equity has made it to the 20% point, as it's a hard thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Appraisal Advisors Group, we know when property values have risen or declined. We're experts at identifying value trends in Caguas, Caguas County, and surrounding areas. When faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. 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: