Allatoona Appraisal can help you remove your Private Mortgage Insurance

A 20% down payment is usually the standard when buying a house. Since the risk for the lender is often only the difference between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and natural value changesin the event a purchaser is unable to pay.

During the recent mortgage boom of the last decade, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower defaults on the loan and the market price of the house is lower than the loan balance.

PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Contradictory to a piggyback loan where the lender consumes all the costs, PMI is lucrative for the lender because they collect the money, and they receive payment 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 homeowners can prevent paying PMI

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial 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 only 80 percent.

Because it can take many years to arrive at the point where the principal is just 20% of the original loan amount, it's essential to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends predict plummeting home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have acquired equity before things cooled off.

The difficult thing for many home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to understand the market dynamics of our area. At Allatoona Appraisal, we're experts at determining 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 usually eliminate the PMI with little effort. At that 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year