Have equity in your home? Want a lower payment? An appraisal from Allatoona Appraisal can help you get rid of your PMI.
When getting a mortgage, a 20% down payment is usually the standard. Considering the liability for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value variationson the chance that a borrower defaults.
The market was taking down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. This additional plan guards the lender in the event a borrower defaults on the loan and the worth of the home is less than what is owed on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible. It's beneficial for the lender because they secure the money, and they get paid if the borrower is unable to pay, contradictory to a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners prevent bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, savvy home owners can get off the hook sooner than expected.
Because it can take many years to arrive at the point where the principal is just 20% of the initial amount borrowed, it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends hint at decreasing home values, you should understand that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to recognize the market dynamics of their area. 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. Faced with data from an appraiser, the mortgage company will generally eliminate 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: