King Valuations, Inc. can help you remove your Private Mortgage InsuranceIt's largely inferred that a 20% down payment is common when buying a house. The lender's liability is generally only the remainder between the home value and the sum outstanding on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value fluctuations on the chance that a borrower defaults.During the recent mortgage upturn of the mid 2000s, it became customary to see lenders making deals with down payments of 10, 5, 3 or sometimes 0 percent. How does a lender manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy covers the lender if a borrower defaults on the loan and the value of the property is less than what is owed on the loan. Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. Unlike a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they obtain the money, and they are covered if the borrower defaults.
How can a home owner prevent bearing the expense of 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. Wise home owners can get off the hook a little early. The law states that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.Considering it can take a significant number of years to arrive at the point where the principal is just 80% of the initial amount of the loan, it's important to know how your Georgia home has appreciated in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends signify lower overall home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have gained equity before things cooled off. A certified, Georgia licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to know the market dynamics of their area. At King Valuations, Inc., we're experts at determining value trends in Roswell, Fulton County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will often do away with the PMI with little anxiety. At which time, the home owner can retain 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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