Let Allatoona Appraisal help you decide if you can eliminate your PMI

A 20% down payment is usually the standard when getting a mortgage. The lender's only exposure is typically just the difference between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower is unable to pay.

Lenders were working with down payments discounted to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the value of the house is less than the balance of the loan.

PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. Instead of a piggyback loan where the lender consumes all the deficits, PMI is advantageous for the lender because they obtain the money, and they get the money if the borrower is unable to pay.


Has your real estate appreciated since you first purchased? Contact Allatoona Appraisal today at 678-574-0222 to see if you can cancel your Private Mortgage Insurance premium.

How can buyers avoid bearing the cost of PMI?

With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on most loans. Smart homeowners can get off the hook a little earlier. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.

It can take a significant number of years to arrive at the point where the principal is only 80% of the initial amount borrowed, so it's important to know how your Georgia home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify decreasing home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things simmered down.

A certified, Georgia licensed real estate appraiser can help homeowners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Allatoona Appraisal, we're masters at determining value trends in Kennesaw, Cobb County, and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. At that time, the homeowner can relish the savings from that point on.


Has your real estate appreciated since you first purchased? Contact Allatoona Appraisal today at 678-574-0222 to see if you can cancel your Private Mortgage Insurance premium.

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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