Have equity in your home? Want a lower payment? An appraisal from Allatoona Appraisal can help you get rid of your PMI.
It's largely known that a 20% down payment is common when getting a mortgage. Considering the liability for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value variationsin the event a borrower defaults.
Lenders were working with down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional policy covers the lender if a borrower defaults on the loan and the value of the property is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. Separate from a piggyback loan where the lender consumes all the losses, PMI is beneficial for the lender because they secure the money, and they get paid 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 a buyer keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law states that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little early.
It can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends hint at plummeting home values, you should understand that real estate is local.
The difficult thing for many home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At Allatoona Appraisal, we're masters at pinpointing value trends in Acworth, Cobb County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At which time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: