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 purchasing a home, a 20% down payment is usually the standard. Considering the risk for the lender is generally only the difference between the home value and the sum due on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and regular value fluctuationsin the event a borrower defaults.
During the recent mortgage boom of the last decade, it became customary to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to handle the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower defaults on the loan and the worth of the property is less than the balance of the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible. It's beneficial for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homebuyers can avoid bearing the cost of PMI
The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute home owners can get off the hook a little earlier. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.
Considering it can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be following the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends forecast decreasing 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 know the market dynamics of our area. At Gregory James Company, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Cedartown, Polk County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally eliminate the PMI with little effort. At that 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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