Payne Appraisal Services, Inc. can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is usually the standard. The lender's only risk is usually just the difference between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and regular value fluctuations in the event a borrower defaults.
Banks were accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender in case a borrower is unable to pay on the loan and the value of the house is less than the balance of the loan.
PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Instead of a piggyback loan where the lender absorbs all the damages, PMI is lucrative for the lender because they acquire the money, and they get paid if the borrower doesn't pay.
How can homebuyers avoid paying PMI?The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart homeowners can get off the hook sooner than expected. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to arrive at the point where the principal is only 80% of the initial amount borrowed, so it's necessary to know how your Georgia home has appreciated in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends hint at declining home values, realize that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have secured equity before things declined.
The hardest thing for almost all homeowners to figure out is whether their home equity has exceeded the 20% point. A certified, Georgia licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At Payne Appraisal Services, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Jasper, Pickens County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little trouble. At that time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: