Have equity in your home? Want a lower payment? An appraisal from Appraisals By Michael can help you get rid of your PMI.
It's widely understood that a 20% down payment is accepted when purchasing a home. The lender's risk is oftentimes only the difference between the home value and the balance outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value changes on the chance that a borrower doesn't pay.
During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders only asking for down payments of 10, 5 or even 0 percent. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy protects the lender in the event a borrower defaults on the loan and the market price of the home is less than the balance of the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and on many occasions isn't even tax deductible, PMI is costly to a borrower. As opposed to a piggyback loan where the lender takes in all the losses, PMI is profitable for the lender because they obtain the money, and they receive payment if the borrower is unable to pay.
|The savings from dropping the PMI required when you got your mortgage pays for the appraisal in no time. Appraisals By Michael are experts when it comes to value trends in the city of Atlanta and Fulton County. Contact us today.|
How can a buyer refrain from paying PMI?
The Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook ahead of time.
It can take a significant number of years to arrive at the point where the principal is just 80% of the original amount of the loan, so it's essential to know how your Georgia home has increased in value. After all, every bit of appreciation you've accomplished over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends indicate decreasing home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have acquired 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. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Appraisals By Michael, we know when property values have risen or declined. We're masters at recognizing value trends in Atlanta, Fulton County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually eliminate the PMI with little effort. At which time, the home owner can retain the savings from that point on.
|The savings from dropping the PMI required when you got your mortgage will make up for the cost of the appraisal in no time. Appraisals By Michael is in the business of tracking real estate value trends in Atlanta and Fulton County. Contact us today.|
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