CMJ Appraisals & Investments LLC can help you remove your Private Mortgage Insurance
A 20% down payment is usually accepted when getting a mortgage. Considering the liability for the lender is generally only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value changesin the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was common to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy guards the lender if a borrower defaults on the loan and the market price of the property is lower than what is owed on the loan.
PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. It's advantageous for the lender because they secure the money, and they get paid if the borrower doesn't pay, contradictory to a piggyback loan where the lender takes in all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homeowners refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen homeowners can get off the hook sooner than expected.
It can take many years to reach the point where the principal is just 20% of the initial amount borrowed, so it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be following the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends forecast decreasing home values, you should understand that real estate is local.
The difficult thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At CMJ Appraisals & Investments LLC, we know when property values have risen or declined. We're experts at recognizing value trends in Smyrna, Cobb County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally drop the PMI with little effort. 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: