Let Capital City Appraisal Services help you learn if you can get rid of your PMIA 20% down payment is typically the standard when buying a house. The lender's risk is usually only the difference between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value variations on the chance that a borrower is unable to pay.During the recent mortgage boom that our country recently experienced, it became common to see lenders only asking for down payments of 10, 5 or often 0 percent. A lender is able to manage the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower is unable to pay on the loan and the value of the home is less than what the borrower still owes on the loan. PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. It's profitable for the lender because they collect the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the damages.
How can home owners avoid bearing the expense of PMI?The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook a little earlier.It can take a significant number of years to arrive at the point where the principal is only 80% of the initial amount borrowed, so it's essential to know how your Georgia home has increased in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends forecast falling home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home may have gained equity before things simmered down. The toughest thing for most homeowners to determine is just when their home's equity rises above the 20% point. An accredited, Georgia licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Capital City Appraisal Services, we're masters at analyzing value trends in Madison, 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 remove the PMI with little trouble. At that time, the home owner 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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