Let Allatoona Appraisal help you decide if you can cancel your PMI
A 20% down payment is typically accepted when buying a house. The lender's liability is usually only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value changes on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This added policy covers the lender if a borrower is unable to pay on the loan and the value of the property is lower than the balance of the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible. It's profitable for the lender because they obtain the money, and they get paid if the borrower doesn't pay, contradictory to 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 homeowners keep from paying PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, acute home owners can get off the hook a little early.
It can take many years to reach the point where the principal is just 20% of the initial amount borrowed, so it's essential to know how your home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends hint at declining 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 know the market dynamics of our area. At Allatoona Appraisal, we're experts at identifying 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 generally eliminate the PMI with little anxiety. At which 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: