The Benchmark Group Inc can help you remove your Private Mortgage InsuranceWhen buying a house, a 20% down payment is usually the standard. The lender's risk is oftentimes only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and typical value fluctuations in the event a purchaser defaults.
During the recent mortgage upturn that our country recently experienced, it was customary to see lenders reducing down payments to 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the market price of the home is lower than what the borrower still owes on the loan.
PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. As opposed to a piggyback loan where the lender absorbs all the deficits, PMI is beneficial for the lender because they secure the money, and they get the money if the borrower defaults.
How can a home buyer keep from bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law states that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, smart homeowners can get off the hook sooner than expected.
Since it can take a significant number of years to reach the point where the principal is just 80% of the original amount of the loan, it's important to know how your Georgia home has appreciated in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends hint at falling home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have gained equity before things cooled off.
The hardest thing for most homeowners to determine is just when their home's equity goes over the 20% point. An accredited, Georgia licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At The Benchmark Group Inc, we're experts at recognizing value trends in Jasper, Pickens County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At that time, the home owner can relish the savings from that point on.
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