FAQ
What is Private Mortgage Insurance?
Private Mortgage Insurance (PMI) is required on loans that are considered a higher risk to the lender. PMI is required when the loan amount financed exceeds 80% of the properties value. The borrower is required to pay a monthly premium for the coverage which protects the lender in case the loan goes into default. For many homebuyers, PMI is the only option when purchasing a home if they do not have 20% to put down. The monthly premium varies depending upon the loan amount in comparison to the property value (LTV), loan size and credit score.
What is an escrow account?
An escrow account is used to collect and hold funds to pay your property taxes and homeowner’s insurance premiums. The account is set up for you by your mortgage company when you take out your mortgage. Realestate taxes and insurance premiums are paid annually and failure to pay these bills on time may cost you money in tax penalties or result in cancellation of your insurance coverage. Therefore, the lender prefers to collect the monthly proration from you each month and then they pay the annual premium when they are due. Most lenders will require an escrow account for loan amounts that exceed 80% of the homes value.
What are the benefits of an escrow account?
Manage your budget: You do not have to make lump sum payments when your taxes and insurance are due. You have made monthly payments throughout the year to cover those obligations.
Gain peace of mind: You don’t need to keep track of when your tax and insurance bills are due. The payments will be made, on time, on your behalf.
Ensure that your home is protected: With paid-up insurance coverage and taxes, you protect your investment in your home and meet your lender’s requirements.
How does an escrow account work?
Here is a simplified example of how escrow payments are calculated:
Annual real estate taxes: $2,400 ÷ 12 months = $200 per month
Annual property insurance: $1,200 ÷ 12 months = $100 per month
Total monthly taxes and insurance: $300
So in this example, $300 would be added to your total monthly mortgage payment and applied to your escrow account. You might hear your total monthly mortgage payment referred to as your “PITI” — for Principal, Interest, Taxes and Insurance.
What is Homestead Exemption?
Every person who has legal title to a residential property in Florida and lives there permanently qualifies for Florida homestead exemption. The standard homestead exemption is $25,000 however, there are additional exemptions that homeowners may qualify for. (For detailed information on all available exemptions, refer to the property appraisers office in the county the property is located in.) You must be a permanent resident of Florida on January 1 of the initial application year. You may either apply by mail (in some counties you can apply online) or in person at any time through the year but the deadline for applying for the exemption is March 1 of the qualifying year.
A copy of your deed and proof of residency is required. You may submit a copy of your Florida driver’s license, voter’s registration or permanent residency card.
Frequently asked questions regarding the Florida “Save Our Homes” also known as the 3% Cap.
Q. What does the 3% cap mean to Florida residents?
A. The cap limits the increase in the annual assessment of homesteaded properties in Florida to 3%, or to the percentage change in the Consumer Price Index, whichever is less.
Q. Who qualifies for this benefit?
A. You must own and live in a residential property that already qualifies for Florida’s Homestead Exemption benefit.
Q. Does the 3% cap limit property taxes?
A. No, it is a cap on the assessed value of a homesteaded property, not on the taxes paid. Florida also allows a 10% cap on non-homesteaded properties, such as second homes or Commercial properties.
Q. Does the 3% cap change the way property values are estimated by the Property Appraiser?
A. No, the responsibility of the Property Appraiser’s Office is to determine a property’s market value to annually produce a fair and equitable tax roll.
Q. What happens to the cap when I sell my homesteaded property and buy a new house?
A. The cap is removed and the value is increased to market value as of Jan. 1 of the following year. If the home you purchased was subject to the cap, the cap is removed and the value is increased to market value the following Jan. 1. In certain cases, a homesteaded property may benefit from Portability which allows you to transfer part of the 3% savings from your old homesteaded property to your new residence.
*The above ”Save Our Homes” Q&A’s were taken from the Palm Beach County Property Appraiser’s website as of 8/4/2010.
