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 the standard when getting a mortgage. Since the risk for the lender is generally only the remainder between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and typical value changesin the event a purchaser doesn't pay.
Banks were accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the value of the home is less than the loan balance.
Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they secure the money, and they get the money if the borrower doesn't pay, separate from a piggyback loan where the lender absorbs all the damages.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers keep from paying PMI?
The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Acute homeowners can get off the hook beforehand. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
Because it can take countless years to get to the point where the principal is only 20% of the original loan amount, it's important to know how your home has appreciated in value. After all, all of the appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends indicate plummeting home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home might have gained equity before things cooled off.
The difficult thing for most homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. 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 masters at recognizing value trends in Fort Smith, Sebastian County and surrounding areas. Faced with information from an appraiser, the mortgage company will often remove the PMI with little effort. At which time, the homeowner can enjoy the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: