Have equity in your home? Want a lower payment? An appraisal from APB Appraisals can help you get rid of your PMI.It's generally understood that a 20% down payment is accepted when getting a mortgage. The lender's only liability is generally just the difference between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and typical value variations on the chance that a purchaser is unable to pay.
Banks were taking down payments discounted to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy protects the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than what is owed on the loan.
Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender consumes all the deficits, PMI is lucrative for the lender because they obtain the money, and they are covered if the borrower doesn't pay.
How can a homebuyer refrain from bearing the expense of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on nearly all loans. Acute homeowners can get off the hook beforehand. The law designates that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.
It can take several years to get to the point where the principal is just 80% of the initial loan amount, so it's essential to know how your Georgia home has grown in value. After all, every bit of appreciation you've achieved over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends hint at decreasing home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home may have secured equity before things cooled off.
An accredited, Georgia licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At APB Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Lagrange, Troup County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At which time, the home owner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: