Have equity in your home? Want a lower payment? An appraisal from Ken Colley & Associates Inc. can help you get rid of your PMI.
It's generally known that a 20% down payment is accepted when purchasing a home. Since the liability for the lender is generally only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and regular value variationson the chance that a borrower defaults.
The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy guards the lender if a borrower is unable to pay on the loan and the value of the house is less than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. Separate from a piggyback loan where the lender takes in all the deficits, PMI is advantageous for the lender because they acquire the money, and they get the money if the borrower is unable to pay.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can home owners keep from paying PMI?
With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute homeowners can get off the hook a little early. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.
Since it can take many years to get to the point where the principal is only 20% of the original loan amount, it's necessary to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home could have secured equity before things cooled off, so even when nationwide trends signify plunging home values, you should understand that real estate is local.
The hardest 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 know the market dynamics of their area. At Ken Colley & Associates Inc., we're masters at determining value trends in Fort Smith, Sebastian 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 usually drop 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: