CMJ Appraisals & Investments LLC can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when buying a house. The lender's risk is oftentimes only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it became widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the value of the house is less 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 generally isn't even tax deductible, PMI is pricey to a borrower. It's profitable for the lender because they obtain the money, and they receive payment if the borrower defaults, separate from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home owner avoid bearing the cost of PMI?
With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, keen home owners can get off the hook ahead of time.
Since it can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've gained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home may have gained equity before things cooled off, so even when nationwide trends forecast plummeting home values, you should realize that real estate is local.
A certified, 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 is an appraiser's job to recognize the market dynamics of their area. At CMJ Appraisals & Investments LLC, we know when property values have risen or declined. We're experts at analyzing value trends in Smyrna, Cobb County and surrounding areas. Faced with figures from an appraiser, the mortgage company will often remove 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: