Let Gregory James Company, Inc. help you decide if you can get rid of your PMI
It's largely known that a 20% down payment is the standard when purchasing a home. Since the liability for the lender is usually only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and typical value variationson the chance that a borrower doesn't pay.
Lenders were accepting 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 supplemental policy covers the lender in the event a borrower is unable to pay on the loan and the value of the property is lower than what is owed on the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. It's money-making for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, contradictory to 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 home owners can prevent bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy homeowners can get off the hook ahead of time. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take many years to arrive at the point where the principal is just 20% of the initial loan amount, so it's necessary to know how your home has increased in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood may not be adopting 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 understand that real estate is local.
A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Gregory James Company, Inc., we know when property values have risen or declined. We're masters at recognizing value trends in Cedartown, Polk County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At which 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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