Have equity in your home? Want a lower payment? An appraisal from Allatoona Appraisal can help you get rid of your PMI.
When purchasing a home, a 20% down payment is typically the standard. Since the risk for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuationsin the event a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added plan protects the lender in the event a borrower is unable to pay on the loan and the value of the home is less than the loan balance.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. It's beneficial for the lender because they obtain the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender absorbs 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 homeowners avoid paying PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise homeowners can get off the hook sooner than expected. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Because it can take countless years to get to the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has increased in value. After all, any appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends indicate falling home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home might have acquired equity before things calmed down.
The hardest thing for many home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Allatoona Appraisal, we know when property values have risen or declined. We're experts at determining value trends in Acworth, Cobb County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually drop the PMI with little effort. At that 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: