Let Steve Houston Appraisals, Inc help you determine if you can cancel your PMIIt's typically known that a 20% down payment is common when buying a house. Since the liability for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuations in the event a borrower doesn't pay.During the recent mortgage upturn of the last decade, it became customary to see lenders only asking for down payments of 10, 5, 3 or sometimes 0 percent. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the market price of the property is less than what the borrower still owes on the loan. PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible. Different from a piggyback loan where the lender consumes all the costs, PMI is lucrative for the lender because they collect the money, and they get the money if the borrower defaults.
How buyers can refrain from bearing the expense of PMIThe Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, acute homeowners can get off the hook a little early.It can take many years to reach the point where the principal is just 80% of the original amount borrowed, so it's essential to know how your Georgia home has grown in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends signify decreasing home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have secured equity before things simmered down. A certified, Georgia licensed real estate appraiser can help home owners figure out if their equity has made it to the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Steve Houston Appraisals, Inc, we're experts at identifying value trends in Marietta, Cobb County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually remove the PMI with little effort. At that time, the home owner can delight in the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year
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