Let Gregory James Company, Inc. help you learn if you can cancel your PMI
It's generally understood that a 20% down payment is common when buying a house. Because the risk for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value changeson the chance that a purchaser doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional policy covers the lender if a borrower defaults on the loan and the worth of the property is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be expensive to a borrower. It's money-making for the lender because they collect the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender takes in 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 keep from bearing the expense of PMI?
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart home owners can get off the hook ahead of time. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.
It can take many years to reach the point where the principal is only 20% of the initial loan amount, so it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends signify decreasing home values, you should understand that real estate is local.
An accredited, 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. 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 determining value trends in Atlanta, Polk County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At that time, the homeowner 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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