Allatoona Appraisal can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is usually the standard. The lender's risk is often only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuations in the event a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary policy guards the lender if a borrower defaults on the loan and the market price of the property is lower than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Contradictory to a piggyback loan where the lender takes in all the costs, PMI is lucrative 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 home buyers can refrain from bearing the cost of PMI
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute homeowners can get off the hook a little earlier. The law states that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Because it can take many years to get to the point where the principal is just 20% of the initial amount of the loan, it's crucial to know how your home has grown in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends forecast falling home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. 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 masters at determining value trends in Kennesaw, Cobb County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often drop the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: