Let Gregory James Company, Inc. help you determine if you can eliminate your PMI

When getting a mortgage, a 20% down payment is usually the standard. Because the risk for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuationsin the event a purchaser is unable to pay.

Banks were accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan covers the lender in case a borrower doesn't pay on the loan and the value of the home 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 frequently isn't even tax deductible, PMI can be pricey to a borrower. Contradictory to a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they collect the money, and they receive payment if the borrower doesn't pay.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How can a buyer refrain from paying PMI?

With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Savvy home owners can get off the hook beforehand. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.

It can take many years to get to the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home could have gained equity before things cooled off, so even when nationwide trends predict declining home values, you should understand that real estate is local.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Gregory James Company, Inc., we know when property values have risen or declined. We're masters at analyzing value trends in Atlanta, Polk County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally drop the PMI with little effort. At that time, the home owner can relish the savings from that point on.

Want to learn more about PMI and the Homeowners Protection Act? Click this link:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year

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