Allatoona Appraisal can help you remove your Private Mortgage Insurance
A 20% down payment is typically accepted when purchasing a home. The lender's liability is generally only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations in the event a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan protects the lender if a borrower doesn't pay on the loan and the worth of the property is less than what the borrower still owes on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible. It's lucrative for the lender because they collect the money, and they receive payment if the borrower defaults, opposite from a piggyback loan where the lender absorbs all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers prevent bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Keen home owners can get off the hook sooner than expected. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take many years to reach the point where the principal is only 20% of the initial amount of the loan, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends predict declining home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home may have acquired equity before things cooled off.
The hardest thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to understand the market dynamics of their area. At Allatoona Appraisal, we're experts at pinpointing 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 generally cancel the PMI with little effort. At that 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: