Have equity in your home? Want a lower payment? An appraisal from can help you get rid of your PMI.
It's largely inferred that a 20% down payment is common when getting a mortgage. The lender's risk is oftentimes only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value changes in the event a borrower defaults.
Banks 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 endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. This added policy protects the lender if a borrower is unable to pay on the loan and the worth of the property is lower than what the borrower still owes on the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's profitable for the lender because they collect the money, and they get the money if the borrower is unable to pay, unlike a piggyback loan where the lender absorbs 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 a home buyer avoid paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Smart home owners can get off the hook a little earlier. The law states that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
Considering it can take countless years to reach the point where the principal is just 20% of the original loan amount, it's important to know how your home has grown in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home might have secured equity before things calmed down, so even when nationwide trends predict decreasing home values, you should realize that real estate is local.
The toughest thing for many home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At , we're experts at analyzing value trends in , Cobb County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little trouble. At which 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: