Allatoona Appraisal can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. Because the risk for the lender is usually only the difference between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and regular value variationsin the event a borrower defaults.
The market was taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional policy covers the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI can be pricey to a borrower. Opposite from a piggyback loan where the lender takes in all the damages, PMI is profitable for the lender because they secure the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homeowner prevent paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, savvy homeowners can get off the hook ahead of time.
Considering it can take many years to get to the point where the principal is just 20% of the original loan amount, it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends forecast decreasing home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have secured equity before things calmed down.
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 recognize the market dynamics of our area. At Allatoona Appraisal, we know when property values have risen or declined. We're experts at identifying value trends in Acworth, Cobb County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often remove the PMI with little effort. At that 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: