Allatoona Appraisal can help you remove your Private Mortgage Insurance
When buying a house, a 20% down payment is typically the standard. Because the liability for the lender is usually only the difference between the home value and the sum due on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and regular value fluctuationsin the event a purchaser doesn't pay.
During the recent mortgage boom of the mid 2000s, it was customary to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan covers the lender if a borrower defaults on the loan and the worth of the house is lower than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. It's favorable for the lender because they secure the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the costs.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can prevent bearing the expense of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, wise home owners can get off the hook ahead of time.
It can take countless years to arrive at the point where the principal is just 20% of the initial amount borrowed, so it's crucial to know how your home has increased 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 dropped below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends indicate falling home values, you should realize that real estate is local.
The difficult thing for many homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to know the market dynamics of their area. At Allatoona Appraisal, we're experts at determining value trends in Kennesaw, Cobb County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little effort. 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: