Let Di Cicco & Associates help you figure out if you can get rid of your PMIA 20% down payment is typically accepted when purchasing a home. The lender's risk is generally only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and typical value changes on the chance that a borrower is unable to pay.
The market was working with down payments dropping to 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the value of the house is less than what is owed on the loan.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible. Different from a piggyback loan where the lender consumes all the damages, PMI is money-making for the lender because they secure the money, and they get paid if the borrower doesn't pay.
How can a home buyer refrain from bearing the expense of PMI?The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Savvy home owners can get off the hook sooner than expected. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent.
It can take many years to reach the point where the principal is only 80% of the original amount borrowed, so it's crucial to know how your Georgia home has grown in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends forecast falling home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have acquired equity before things cooled off.
An accredited, Georgia licensed real estate appraiser can help homeowners figure out just when their home's equity rises above the 20% point, as it's a tough thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Di Cicco & Associates, we know when property values have risen or declined. We're experts at determining value trends in Powder Springs, Cobb County, and surrounding areas. Faced with data from an appraiser, the mortgage company will generally drop the PMI with little effort. At which time, the homeowner can enjoy the savings from that point on.
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