Have equity in your home? Want a lower payment? An appraisal from Allatoona Appraisal can help you get rid of your PMI.
A 20% down payment is typically the standard when getting a mortgage. Because the risk for the lender is often only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value changesin the event a borrower defaults.
During the recent mortgage boom of the last decade, it became customary to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the market price of the home is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the damages, PMI is beneficial for the lender because they collect the money, and they get the money 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 buyers keep from bearing the cost of PMI?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook sooner than expected. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.
It can take countless years to reach the point where the principal is just 20% of the original amount of the loan, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've gained 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 may not be adopting the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends forecast decreasing home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Allatoona Appraisal, we're experts at pinpointing value trends in Acworth, Cobb County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often remove the PMI with little trouble. 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: