We can help you remove your Private Mortgage Insurance
A 20% down payment is usually the standard when purchasing a home. Since the risk for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value variations on the chance that a borrower defaults.
The market was accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added plan covers the lender in the event a borrower is unable to pay on the loan and the market price of the home is lower than the balance of the loan.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender consumes all the deficits, PMI is profitable for the lender because they acquire the money, and they get paid if the borrower defaults.
How can homebuyers refrain from bearing the expense of PMI?
With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, savvy home owners can get off the hook sooner than expected.
Because it can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, it's necessary to know how your home has grown in value. After all, all of the appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends forecast decreasing home values, you should realize that real estate is local.
The toughest thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to keep up with the market dynamics of their area. At Capital City Real Estate Group, LLC, we're experts at recognizing value trends in Sharpsburg, Coweta County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually do away with the PMI with little effort. At that time, the home owner can enjoy the savings from that point on.