Have equity in your home? Want a lower payment? An appraisal from Gregory James Company, Inc. can help you get rid of your PMI.
A 20% down payment is usually accepted when buying a house. The lender's liability is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value changes in the event a borrower is unable to pay.
During the recent mortgage upturn of the mid 2000s, it became customary to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower defaults on the loan and the worth of the house is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the costs, 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 homebuyers can keep from paying PMI
The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law guarantees that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook ahead of time.
It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's essential to know how your home has increased in value. After all, all of the appreciation you've acquired over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home could have secured equity before things calmed down, so even when nationwide trends hint at falling home values, you should realize that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Gregory James Company, Inc., we know when property values have risen or declined. We're masters at analyzing value trends in Cedartown, Polk County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that 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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