Have equity in your home? Want a lower payment? An appraisal from Allatoona Appraisal can help you get rid of your PMI.
A 20% down payment is usually accepted when purchasing a home. Since the liability for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value variationsin the event a borrower 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. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the worth of the property is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Opposite from a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they secure the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can buyers prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute homeowners can get off the hook beforehand. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Considering it can take countless years to get to the point where the principal is only 20% of the initial loan amount, it's essential to know how your home has grown in value. After all, all of the appreciation you've accomplished over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends hint at declining home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things simmered down.
The toughest thing for many homeowners 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 keep up with the market dynamics of their area. At Allatoona Appraisal, we're masters at identifying 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 often cancel the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: