Let Allatoona Appraisal help you figure out if you can eliminate your PMI
When buying a house, a 20% down payment is usually the standard. Considering the liability for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and typical value variationson the chance that a purchaser is unable to pay.
Lenders were accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan protects the lender in case a borrower defaults on the loan and the value of the property is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender consumes all the damages, PMI is profitable for the lender because they secure the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer avoid bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen homeowners can get off the hook ahead of time. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
Considering it can take countless years to arrive at the point where the principal is only 20% of the initial loan amount, it's crucial to know how your home has appreciated in value. After all, any appreciation you've achieved over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends indicate falling home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things simmered down.
The hardest thing for almost all home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Allatoona Appraisal, we know when property values have risen or declined. We're experts at determining value trends in Kennesaw, Cobb County and surrounding areas. When faced with information from an appraiser, the mortgage company will often remove the PMI with little anxiety. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: