Ken Colley & Associates Inc. can help you remove your Private Mortgage Insurance
It's typically inferred that a 20% down payment is accepted when purchasing a home. Since the risk for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value fluctuationsin the event a purchaser defaults.
The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the market price of the property is less than the balance of the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. It's beneficial for the lender because they acquire the money, and they get paid if the borrower defaults, contradictory to a piggyback loan where the lender takes in all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How homeowners can prevent paying PMI
With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Savvy homeowners can get off the hook a little early. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Since it can take many years to reach the point where the principal is just 20% of the initial loan amount, it's necessary to know how your home has appreciated in value. After all, any appreciation you've achieved 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 be reflecting the national trends and/or your home might have gained equity before things simmered down, so even when nationwide trends predict declining home values, you should understand that real estate is local.
A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Ken Colley & Associates Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in Fort Smith, Sebastian County and surrounding areas. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little anxiety. 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: