Allatoona Appraisal can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when purchasing a home. Because the risk for the lender is oftentimes only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value variationsin the event a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the worth of the house is lower than the balance of the loan.
PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the deficits, PMI is favorable for the lender because they secure the money, and they get paid 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 can a buyer keep from bearing the cost of PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy home owners can get off the hook ahead of time.
It can take many years to get to the point where the principal is only 20% of the initial amount borrowed, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've achieved 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 signify plunging home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have acquired equity before things settled down.
The toughest thing for many home owners to know is just when their home's equity goes over 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 know when property values have risen or declined. We're experts at pinpointing value trends in Kennesaw, Cobb County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: