Have equity in your home? Want a lower payment? An appraisal from Ken Colley & Associates Inc. can help you get rid of your PMI.

A 20% down payment is typically accepted when getting a mortgage. Considering the liability for the lender is often only the remainder between the home value and the sum due on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and regular value changesin the event a borrower is unable to pay.

During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender in the event a borrower is unable to pay on the loan and the value of the property is less than what the borrower still owes on the loan.

PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they get the money if the borrower doesn't pay, separate from a piggyback loan where the lender absorbs 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 avoid bearing the cost of PMI

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart homeowners can get off the hook a little early. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.

It can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has appreciated in value. After all, all of the appreciation you've achieved over time counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends forecast declining home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have gained equity before things cooled off.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Ken Colley & Associates Inc., we're experts at recognizing value trends in Fort Smith, Sebastian 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 drop the PMI with little anxiety. At which time, the home owner can enjoy 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