www.infinite-estates.com can help you remove your Private Mortgage InsuranceWhen getting a mortgage, a 20% down payment is usually the standard. The lender's only exposure is typically just the difference between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value changes on the chance that a purchaser defaults.
The market was taking down payments discounted to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added policy covers the lender in the event a borrower is unable to pay on the loan and the value of the house is lower than the loan balance.
Since 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 pricey to a borrower. It's money-making for the lender because they secure the money, and they receive payment if the borrower defaults, unlike a piggyback loan where the lender absorbs all the costs.
How can a buyer keep from bearing the cost of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. Wise home owners can get off the hook sooner than expected. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.
It can take several years to get to the point where the principal is only 80% of the initial amount of the loan, so it's important to know how your Georgia home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have gained equity before things simmered down.
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. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At www.infinite-estates.com, we know when property values have risen or declined. We're masters at recognizing value trends in Pine Lake, Dekalb County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At which 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year