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 getting a mortgage, a 20% down payment is usually the standard. Since the risk for the lender is generally only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and regular value changesin the event a purchaser doesn't pay.
During the recent mortgage upturn of the last decade, it was customary to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy covers the lender if a borrower doesn't pay on the loan and the value of the property is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible. It's favorable for the lender because they secure the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender consumes 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 refrain from bearing the expense of PMI
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Savvy home owners can get off the hook a little early. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
Because it can take countless years to arrive at the point where the principal is just 20% of the original loan amount, it's essential to know how your home has increased in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends predict declining home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things cooled off.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Gregory James Company, Inc., we're masters at identifying value trends in Atlanta, Polk County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that time, the homeowner can retain the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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