Have equity in your home? Want a lower payment? An appraisal from Gregory James Company, Inc. can help you get rid of your PMI.
It's generally known that a 20% down payment is common when getting a mortgage. The lender's risk is oftentimes only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value changes on the chance that a borrower doesn't pay.
Banks were working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the value of the house is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible, PMI is pricey to a borrower. It's lucrative for the lender because they secure the money, and they receive payment if the borrower doesn't pay, contradictory to 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 can a homeowner prevent bearing the expense of PMI?
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Keen homeowners can get off the hook beforehand. The law designates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.
It can take many years to get to the point where the principal is just 20% of the original amount of the loan, so it's important to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends predict falling home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have gained equity before things calmed down.
The hardest thing for almost all home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand 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. When faced with data from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At which time, the homeowner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link:
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