Schmid, Jobson & Company, LLC can help you remove your Private Mortgage InsuranceIt's generally understood that a 20% down payment is the standard when buying a house. The lender's only exposure is usually just 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, selling the home again, and typical value fluctuations on the chance that a borrower doesn't pay.During the recent mortgage upturn of the last decade, it became customary to see lenders only asking for down payments of 10, 5, 3 or even 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy takes care of the lender in case a borrower is unable to pay on the loan and the market price of the home is less than what the borrower still owes on the loan. PMI is pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the losses, PMI is money-making for the lender because they obtain the money, and they get the money if the borrower doesn't pay.
How homebuyers can prevent bearing the cost of PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on nearly all loans. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, savvy home owners can get off the hook ahead of time.It can take a significant number of years to get to the point where the principal is only 80% of the initial loan amount, so it's essential to know how your Georgia home has increased in value. After all, all of the appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends hint at declining home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have gained equity before things cooled off. A certified, Georgia licensed real estate appraiser can help home owners figure out just when their home's equity rises above 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 Schmid, Jobson & Company, LLC, we're experts at pinpointing value trends in Savannah, Chatham County, and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often remove the PMI with little trouble. At which time, the homeowner 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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