Gregory James Company, Inc. can help you remove your Private Mortgage Insurance
It's largely inferred that a 20% down payment is accepted when getting a mortgage. Considering the risk for the lender is often only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and regular value fluctuationsin the event a borrower doesn't pay.
During the recent mortgage boom of the last decade, it became common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender in case a borrower is unable to pay on the loan and the worth of the home is lower than the loan balance.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the losses, PMI is advantageous for the lender because they acquire the money, and they get paid if the borrower defaults.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How home buyers can keep from bearing the cost of PMI
The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, acute homeowners can get off the hook a little early.
It can take countless years to get to the point where the principal is just 20% of the original amount of the loan, so it's necessary to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends indicate declining home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things calmed down.
The toughest thing for many homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to understand 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 data from an appraiser, the mortgage company will usually do away with 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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