Let Allatoona Appraisal help you figure out if you can cancel your PMI
A 20% down payment is usually accepted when purchasing a home. Considering the risk for the lender is generally only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and typical value changesin the event a purchaser defaults.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary policy protects the lender if a borrower doesn't pay on the loan and the value of the home is less than the balance of the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. Different from a piggyback loan where the lender consumes all the damages, PMI is favorable for the lender because they acquire 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 homeowners keep from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook a little earlier.
Considering it can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has grown in value. After all, every bit of appreciation you've acquired over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends signify plunging home values, be aware that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home could have secured equity before things cooled off.
The difficult thing for almost all home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Allatoona Appraisal, we're experts at recognizing 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 most often do away with the PMI with little effort. 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: