Let JeffCorbett help you learn if you can get rid of your PMIA 20% down payment is typically accepted when getting a mortgage. The lender's only exposure is usually just the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value variations on the chance that a purchaser defaults.During the recent mortgage upturn of the last decade, it became customary to see lenders reducing down payments to 10, 5, 3 or sometimes 0 percent. A lender is able to manage the increased risk of the small down payment with Private Mortgage Insurance or PMI. This added policy protects the lender if a borrower doesn't pay on the loan and the value of the home is lower than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI is pricey to a borrower. It's favorable for the lender because they obtain the money, and they get the money if the borrower defaults, as opposed to a piggyback loan where the lender takes in all the deficits.
How home owners can keep from bearing the cost of PMIThe Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law stipulates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook sooner than expected.Considering it can take several years to reach the point where the principal is just 80% of the initial amount borrowed, it's important to know how your Georgia home has grown in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not adhere to national trends and/or your home could have gained equity before the economy simmered down. So even when nationwide trends predict decreasing home values, you should realize that real estate is local. 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 difficult thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At JeffCorbett, we're experts at identifying value trends in Macon, Bibb County, and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At which time, the home owner 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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