Gregory James Company, Inc. can help you remove your Private Mortgage Insurance
It's typically understood that a 20% down payment is accepted when purchasing a home. Since the risk for the lender is oftentimes only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and typical value fluctuationsin the event a borrower defaults.
During the recent mortgage upturn of the last decade, it was widespread 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. This additional plan protects the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than what the borrower still owes on the loan.
PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender absorbs all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a homebuyer avoid paying PMI?
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy home owners can get off the hook a little earlier. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take many years to reach the point where the principal is just 20% of the initial amount of the loan, so it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends hint at decreasing home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners 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 know the market dynamics of their area. At Gregory James Company, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Atlanta, Polk County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally do away with the PMI with little effort. At that 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:
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