Let Gregory James Company, Inc. help you learn if you can eliminate your PMI
It's widely inferred that a 20% down payment is the standard when purchasing a home. Since the risk for the lender is oftentimes only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuationson the chance that a borrower is unable to pay.
Banks were accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to endure the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the worth of the property is less than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI can be expensive to a borrower. Different from a piggyback loan where the lender absorbs all the deficits, PMI is favorable for the lender because they acquire the money, and they get paid 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 home owner keep from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law promises that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, savvy home owners can get off the hook a little earlier.
It can take many years to get to 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 grown in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends signify plunging home values, be aware that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have gained equity before things cooled off.
The toughest thing for most home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. 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 experts at pinpointing value trends in Cedartown, Polk County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally drop the PMI with little trouble. 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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