Let Allatoona Appraisal help you discover if you can cancel your PMI
A 20% down payment is usually accepted when purchasing a home. Since the risk for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value variationsin the event a borrower is unable to pay.
During the recent mortgage boom of the mid 2000s, it was common to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower is unable to pay on the loan and the value of the house is less than what is owed on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be pricey to a borrower. It's profitable for the lender because they acquire the money, and they get paid if the borrower is unable to pay, contradictory to a piggyback loan where the lender consumes all the damages.
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?
With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute homeowners can get off the hook sooner than expected. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
Because it can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, it's important to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends predict plunging home values, you should realize that real estate is local.
The toughest thing for many homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Allatoona Appraisal, we're experts 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 do away with the PMI with little trouble. At which time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: