Let Orchard Hill Appraisal help you figure out if you can eliminate your PMIA 20% down payment is usually accepted when getting a mortgage. Because the liability for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower doesn't pay.
Banks were accepting down payments discounted to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the market price of the house is less than the loan balance.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. It's favorable for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the losses.
How can homebuyers refrain from bearing the expense of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. Keen homeowners can get off the hook a little early. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.
It can take a significant number of years to get to the point where the principal is only 80% of the original amount borrowed, so it's important to know how your Georgia home has appreciated in value. After all, every bit of appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends signify declining home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home could have acquired equity before things declined.
The hardest thing for most consumers to figure out is whether their home equity has exceeded the 20% point. A certified, Georgia licensed real estate appraiser can certainly help. It's an appraiser's job to know the market dynamics of their area. At Orchard Hill Appraisal, we know when property values have risen or declined. We're experts at pinpointing value trends in Griffin, Spalding County, and surrounding areas. Faced with data from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. At that 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