Have equity in your home? Want a lower payment? An appraisal from Allatoona Appraisal can help you get rid of your PMI.
It's typically understood that a 20% down payment is the standard when purchasing a home. The lender's liability is generally only the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value variations on the chance that a borrower doesn't pay.
Lenders were taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower defaults on the loan and the value of the home is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and generally isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender absorbs all the losses, PMI is advantageous for the lender because they obtain the money, and they receive payment 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 home owners avoid bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen home owners can get off the hook a little earlier. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take countless years to get to the point where the principal is just 20% of the original amount borrowed, so it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends signify plummeting home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to understand the market dynamics of their area. At Allatoona Appraisal, we know when property values have risen or declined. We're masters at pinpointing value trends in Acworth, Cobb County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: