Allatoona Appraisal can help you remove your Private Mortgage Insurance
When purchasing a home, a 20% down payment is usually the standard. The lender's liability is often only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value variations on the chance that a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the market price of the home is lower than the balance of the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they acquire the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can avoid bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, keen home owners can get off the hook a little early.
It can take many years to get to the point where the principal is only 20% of the original loan amount, so it's important to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends predict declining home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have acquired equity before things simmered down.
The difficult thing for many homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Allatoona Appraisal, we know when property values have risen or declined. We're masters at identifying value trends in Kennesaw, Cobb County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally drop the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: