Have equity in your home? Want a lower payment? An appraisal from Homeward Appraisals can help you get rid of your PMI.It's generally known that a 20% down payment is accepted when buying a house. Since the risk for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and natural value changes on the chance that a purchaser doesn't pay.
Banks were working with down payments dropping to 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional plan takes care of the lender in case a borrower doesn't pay on the loan and the market price of the home is less than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they collect the money, and they receive payment if the borrower doesn't pay, in contrast to a piggyback loan where the lender consumes all the losses.
How can homeowners keep from bearing the cost of PMI?The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Acute home owners can get off the hook ahead of time. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take several years to reach the point where the principal is just 80% of the initial loan amount, so it's important to know how your Georgia home has grown in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not conform to national trends and/or your home could have acquired equity before the economy simmered down. So even when nationwide trends indicate declining home values, you should know most importantly that real estate is local.
The hardest thing for most people to figure out is whether their home equity has exceeded the 20% point. A certified, Georgia licensed real estate appraiser can certainly help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Homeward Appraisals, we know when property values have risen or declined. We're experts at determining value trends in Jasper, Pickens County, and surrounding areas. Faced with information from an appraiser, the mortgage company will often do away with the PMI with little trouble. 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: