Have equity in your home? Want a lower payment? An appraisal from Allatoona Appraisal can help you get rid of your PMI.
A 20% down payment is usually the standard when getting a mortgage. The lender's liability is usually only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the increased risk of the small down payment with Private Mortgage Insurance or PMI. This supplementary plan covers the lender if a borrower doesn't pay on the loan and the market price of the home is lower than the loan balance.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. It's beneficial for the lender because they collect the money, and they get the money 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 refrain from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, wise home owners can get off the hook a little earlier.
It can take countless years to arrive at the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends forecast falling home values, understand that real estate is local. Your neighborhood might not be adopting the national trends and/or your home might have acquired equity before things settled down.
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. It's an appraiser's job to keep up with the market dynamics of their area. At Allatoona Appraisal, we're masters at analyzing value trends in Kennesaw, Cobb County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often remove the PMI with little effort. At that time, the home owner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: