Let Thomas Realty help you decide if you can get rid of your PMIWhen buying a house, a 20% down payment is usually the standard. The lender's liability is usually only the difference between the home value and the balance outstanding on the loan, so the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and typical value fluctuations in the event a purchaser defaults.The market was working with down payments dropping to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower is unable to pay on the loan and the market price of the home is less than the loan balance. PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they get the money if the borrower is unable to pay, in contrast to a piggyback loan where the lender consumes all the losses.
How can homebuyers refrain from bearing the cost of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, wise homeowners can get off the hook ahead of time.It can take several years to reach the point where the principal is just 80% of the original amount of the loan, so it's crucial to know how your Georgia home has increased in value. After all, every bit of appreciation you've gained over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not follow national trends and/or your home may have secured equity before things simmered down. So even when nationwide trends hint at decreasing home values, you should know most importantly that real estate is local. A certified, Georgia licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to know the market dynamics of their area. At Thomas Realty, we know when property values have risen or declined. We're masters at analyzing value trends in Eastman, Dodge County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often remove the PMI with little trouble. At that time, the homeowner 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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