Let CMJ Appraisals & Investments LLC help you determine if you can eliminate your PMI
When purchasing a home, a 20% down payment is usually the standard. Because the risk for the lender is generally only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and natural value fluctuationson the chance that a borrower is unable to pay.
The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan guards the lender if a borrower defaults on the loan and the worth of the house is lower than what the borrower still owes on the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender takes in all the costs, PMI is profitable for the lender because they obtain the money, and they receive payment if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a buyer refrain from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart homeowners can get off the hook beforehand. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
Because it can take many years to arrive at the point where the principal is only 20% of the initial loan amount, it's necessary to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be following the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends indicate decreasing home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to understand the market dynamics of their area. At CMJ Appraisals & Investments LLC, we're masters at identifying value trends in Smyrna, Cobb County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often do away with the PMI with little effort. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: