Have equity in your home? Want a lower payment? An appraisal from Larry Bridges can help you get rid of your PMI.It's widely inferred that a 20% down payment is the standard when purchasing a home. Since the risk for the lender is often only the remainder between the home value and the amount due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations in the event a borrower defaults.During the recent mortgage boom that our country recently experienced, it became common to see lenders only asking for down payments of 10, 5, 3 or sometimes 0 percent. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy guards the lender in the event a borrower is unable to pay on the loan and the value of the house is less than the balance of the loan. Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's beneficial for the lender because they collect the money, and they receive payment if the borrower doesn't pay, unlike a piggyback loan where the lender takes in all the losses.
How can homebuyers refrain from bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Wise homeowners can get off the hook beforehand. The law stipulates that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.It can take several years to arrive at the point where the principal is just 80% of the initial loan amount, so it's important to know how your Georgia home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends predict lower overall home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have secured equity before things declined. The toughest thing for almost all people to determine is just when their home's equity rises above the 20% point. An accredited, Georgia licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At Larry Bridges, we know when property values have risen or declined. We're masters at pinpointing value trends in Auburn, Barrow County, and surrounding areas. Faced with information from an appraiser, the mortgage company will usually do away with the PMI with little effort. At which time, the home owner 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
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