Let Allatoona Appraisal help you determine if you can get rid of your PMI
A 20% down payment is usually the standard when buying a house. Since the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value variationson the chance that a borrower defaults.
Banks were working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the worth of the house is less than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender takes in all the damages, PMI is advantageous 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 refrain from bearing the cost of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy homeowners can get off the hook ahead of time. The law states that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to reach the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has grown in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends forecast declining home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home could have gained equity before things simmered down.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our 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 information from an appraiser, the mortgage company will often eliminate 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: