Have equity in your home? Want a lower payment? An appraisal from Gregory James Company, Inc. can help you get rid of your PMI.
When buying a house, a 20% down payment is usually the standard. The lender's risk is generally only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser defaults.
The market was working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the market price of the house is less than what the borrower still owes on the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. It's advantageous for the lender because they secure the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer refrain 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 equals 78 percent of the beginning loan amount. Keen home owners can get off the hook a little earlier. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.
Because it can take countless years to arrive at the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends signify plummeting 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 rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to know 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 Atlanta, Polk County and surrounding areas. When faced with data 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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