Real Value Appraisal Services can help you remove your Private Mortgage InsuranceIt's widely understood that a 20% down payment is accepted when buying a house. The lender's risk is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and natural value fluctuations on the chance that a borrower defaults.Banks were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan covers the lender in case a borrower defaults on the loan and the market price of the house is less than what is owed on the loan. PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and on many occasions isn't even tax deductible. It's lucrative for the lender because they secure the money, and they receive payment if the borrower defaults, in contrast to a piggyback loan where the lender absorbs all the losses.
How homebuyers can prevent paying PMIThe Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Savvy home owners can get off the hook a little early. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.It can take many years to arrive at the point where the principal is only 80% of the initial amount of the loan, so it's essential to know how your Georgia home has increased in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not conform to national trends and/or your home could have gained equity before things cooled off. So even when nationwide trends hint at a reduction in home values, you should know most importantly that real estate is local. A certified, 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 recognize the market dynamics of our area. At Real Value Appraisal Services, we're masters at determining value trends in Atlanta, Fulton County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At which 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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