Let Allatoona Appraisal help you figure out if you can cancel your PMI

When buying a house, a 20% down payment is typically the standard. The lender's risk is oftentimes only the difference between the home value and the balance remaining on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and regular value variations on the chance that a purchaser is unable to pay.

During the recent mortgage boom of the mid 2000s, it was customary to see lenders only asking for down payments of 10, 5, 3 or often 0 percent. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy takes care of the lender if a borrower defaults on the loan and the value of the home is less than the balance of the loan.

PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the deficits, PMI is beneficial for the lender because they secure the money, and they get the money if the borrower is unable to pay.


Has your home value appreciated since you first purchased? Contact Allatoona Appraisal today at 678-574-0222. You may be able to save money by removing your Private Mortgage Insurance premium.

How can a buyer avoid bearing the expense of PMI?

The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Wise homeowners can get off the hook a little earlier. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.

Because it can take several years to get to the point where the principal is just 80% of the original amount borrowed, it's necessary to know how your Georgia home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home may have gained equity before the economy simmered down. So even when nationwide trends hint at decreasing home values, you should know most importantly that real estate is local.

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. It is an appraiser's job to know the market dynamics of their area. At Allatoona Appraisal, we're masters at recognizing value trends in Kennesaw, Cobb County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.


Does your monthly house payment include a fee for PMI? Call Allatoona Appraisal today at 678-574-0222 or send us an e-mail. A new appraisal could save you thousands.

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