Let Gregory James Company, Inc. help you determine if you can get rid of your PMI

When getting a mortgage, a 20% down payment is typically the standard. Since the risk for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value variationson the chance that a borrower is unable to pay.

Banks were taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental policy guards the lender in the event a borrower defaults on the loan and the market price of the property is less than the balance of the loan.

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 takes in all the losses, PMI is advantageous for the lender because they secure the money, and they get the money 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 homebuyers avoid bearing the expense of 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. Acute home owners can get off the hook sooner than expected. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.

It can take many years to reach the point where the principal is only 20% of the original amount borrowed, so it's essential to know how your home has increased in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard 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're masters at determining value trends in Atlanta, Polk County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year

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