Let Allatoona Appraisal help you figure out if you can get rid of your PMI
It's typically inferred that a 20% down payment is accepted when purchasing a home. The lender's liability is oftentimes only the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and regular value changes on the chance that a purchaser is unable to pay.
Lenders were working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan guards the lender if a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers refrain from paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, keen home owners can get off the hook a little early.
Considering it can take many years to reach the point where the principal is just 20% of the original loan amount, it's crucial to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends indicate plunging home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Allatoona Appraisal, we know when property values have risen or declined. We're experts at identifying value trends in Acworth, Cobb County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally cancel the PMI with little effort. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: