Allatoona Appraisal can help you remove your Private Mortgage Insurance
It's largely inferred that a 20% down payment is common when getting a mortgage. Considering the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value variationson the chance that a borrower doesn't pay.
The market was working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the value of the house is less than what the borrower still owes on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender consumes all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart home owners can get off the hook a little earlier. The law stipulates that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
Since it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has grown in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends forecast decreasing home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things cooled off.
The hardest thing for many homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At Allatoona Appraisal, we're experts at analyzing 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 often eliminate the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: