Have equity in your home? Want a lower payment? An appraisal from Gregory James Company, Inc. can help you get rid of your PMI.
It's typically inferred that a 20% down payment is accepted when purchasing a home. The lender's liability is often only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and typical value variations in the event a purchaser defaults.
During the recent mortgage boom of the last decade, it was customary to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the low 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 market price of the house is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI can be costly to a borrower. Opposite from a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they obtain the money, and they receive payment if the borrower is unable to 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 keep from bearing the expense of PMI?
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy home owners can get off the hook ahead of time. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
Because it can take many years to reach 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, all of the appreciation you've achieved over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home may have secured equity before things simmered down, so even when nationwide trends indicate plunging home values, you should realize that real estate is local.
The toughest thing for most home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Gregory James Company, Inc., we know when property values have risen or declined. We're masters at analyzing value trends in Cedartown, Polk County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At that time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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