Let Allatoona Appraisal help you discover if you can get rid of your PMI
It's generally known that a 20% down payment is common when getting a mortgage. The lender's liability is usually only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and natural value variations in the event a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it was common to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender manage the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy protects the lender if a borrower defaults on the loan and the worth of the house is less than the balance of the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's favorable for the lender because they secure the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer keep from paying PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy homeowners 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 equals just 80 percent.
Because it can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends indicate plummeting home values, understand that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have gained equity before things cooled off.
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's an appraiser's job to recognize the market dynamics of their area. At Allatoona Appraisal, we know when property values have risen or declined. We're experts at determining value trends in Acworth, Cobb County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally remove the PMI with little trouble. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: