Have equity in your home? Want a lower payment? An appraisal from Allatoona Appraisal can help you get rid of your PMI.
It's typically known that a 20% down payment is the standard when getting a mortgage. The lender's liability is usually only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuations in the event a borrower defaults.
During the recent mortgage upturn of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy covers the lender in case a borrower defaults on the loan and the market price of the property is less than what is owed on the loan.
PMI can be expensive 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 money-making for the lender because they acquire the money, and they get the money if the borrower is unable to pay, different 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 home owners keep from bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Wise home owners can get off the hook a little early. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Since it can take many years to get to the point where the principal is only 20% of the original amount borrowed, it's crucial to know how your home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends predict falling home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have gained equity before things cooled off.
The difficult thing for almost all homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At Allatoona Appraisal, we're masters at recognizing value trends in Acworth, Cobb County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often cancel the PMI with little effort. At that time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: