Allatoona Appraisal can help you remove your Private Mortgage Insurance
A 20% down payment is typically the standard when purchasing a home. Because the risk for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuationson the chance that a purchaser is unable to pay.
Lenders were taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the value of the house is less than what is owed on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the losses, PMI is advantageous for the lender because they acquire the money, and they get the money 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 homeowners avoid bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, acute homeowners can get off the hook sooner than expected.
Considering it can take countless years to get to the point where the principal is only 20% of the original amount borrowed, it's important to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends signify decreasing home values, you should realize that real estate is local.
The hardest thing for most homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to keep up with the market dynamics of their area. At Allatoona Appraisal, we're masters at pinpointing value trends in Kennesaw, Cobb County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often drop the PMI with little anxiety. At that 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: