Let Allatoona Appraisal help you discover if you can eliminate your PMI

When purchasing a home, a 20% down payment is usually the standard. Considering the liability for the lender is generally only the remainder between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value changeson the chance that a purchaser doesn't pay.

The market was accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the worth of the property is less than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender absorbs all the losses, PMI is profitable for the lender because they secure the money, and they receive payment if the borrower defaults.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How can home owners prevent paying PMI?

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart homeowners can get off the hook sooner than expected. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.

It can take countless years to get to the point where the principal is only 20% of the original amount of the loan, so it's crucial to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home may have secured equity before things cooled off, so even when nationwide trends indicate plunging home values, you should understand that real estate is local.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Allatoona Appraisal, we're masters at determining value trends in Acworth, 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 usually drop 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year