Let Allatoona Appraisal help you decide if you can get rid of your PMI
It's typically inferred that a 20% down payment is the standard when buying a house. Since the liability for the lender is oftentimes only the difference between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value variationsin the event a purchaser is unable to pay.
Lenders were 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 manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the market price of the property is lower than what is owed on the loan.
PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. It's profitable for the lender because they acquire the money, and they get the money if the borrower is unable to pay, opposite from a piggyback loan where the lender consumes all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer prevent 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 reaches 78 percent of the primary loan amount. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, wise home owners can get off the hook a little earlier.
Since it can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, it's crucial to know how your home has grown in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home could have acquired equity before things calmed down, so even when nationwide trends predict declining home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help homeowners 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 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 data from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: