Have equity in your home? Want a lower payment? An appraisal from Allatoona Appraisal can help you get rid of your PMI.
It's generally inferred that a 20% down payment is the standard when buying a house. The lender's risk is oftentimes only the remainder between the home value and the amount due on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value changes in the event a borrower defaults.
During the recent mortgage boom of the mid 2000s, it became customary to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the worth of the house is lower than what is owed on 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. Unlike a piggyback loan where the lender absorbs all the costs, PMI is favorable for the lender because they acquire the money, and they receive payment if the borrower doesn't pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer avoid paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise home owners can get off the hook sooner than expected. The law designates that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, so it's important to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends signify declining home values, realize that real estate is local. Your neighborhood may not be minding the national trends and/or your home may have gained equity before things simmered down.
The difficult thing for most homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. 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 masters at recognizing value trends in Acworth, Cobb County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At that 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: