Baldwin & Hufstetler Real Estate Appraiser can help you remove your Private Mortgage InsuranceIt's widely known that a 20% down payment is the standard when purchasing a home. 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 typical value fluctuations in the event a borrower is unable to pay.
Lenders were working with down payments dropping to 10, 5 and frequently 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. This additional policy covers the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI can be costly to a borrower. It's profitable for the lender because they secure the money, and they are covered if the borrower defaults, in contrast to a piggyback loan where the lender consumes all the damages.
How can homeowners avoid bearing the expense of PMI?With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. Smart homeowners can get off the hook ahead of time. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take a significant number of years to arrive at the point where the principal is just 80% of the initial amount of the loan, so it's necessary to know how your Georgia home has grown in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not conform to national trends and/or your home might have acquired equity before the economy simmered down. So even when nationwide trends indicate declining home values, you should understand that real estate is local.
The toughest thing for almost all people to determine is whether their home equity has exceeded the 20% point. A certified, Georgia licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At Baldwin & Hufstetler Real Estate Appraiser, we're experts at analyzing value trends in Marietta, Cobb County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little trouble. At which 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: