Let Allatoona Appraisal help you decide if you can eliminate your PMI
It's widely inferred that a 20% down payment is the standard when purchasing a home. Considering the liability for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value variationson the chance that a borrower is unable to pay.
The market was working with down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental policy guards the lender in case a borrower doesn't pay on the loan and the worth of the property is less than the loan balance.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they get the money if the borrower defaults, contradictory to a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home buyers prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy home owners can get off the hook a little earlier. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
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 grown in value. After all, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends signify decreasing home values, you should realize that real estate is local.
The difficult thing for many homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to keep up with the market dynamics of their area. At Allatoona Appraisal, we know when property values have risen or declined. We're masters at analyzing value trends in Acworth, Cobb County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. 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: