Allatoona Appraisal can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when purchasing a home. Since the liability for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value changeson the chance that a purchaser is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy guards the lender if a borrower is unable to pay on the loan and the market price of the house 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 expensive to a borrower. Contradictory to a piggyback loan where the lender takes in all the deficits, PMI is profitable for the lender because they secure the money, and they get paid 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 can homeowners keep from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little earlier.
It can take many years to reach the point where the principal is just 20% of the initial amount borrowed, so it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends signify plunging home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things simmered down.
The hardest thing for most home owners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to understand the market dynamics of their area. At Allatoona Appraisal, we're masters at analyzing 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 cancel the PMI with little trouble. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: