Ken Colley & Associates Inc. can help you remove your Private Mortgage Insurance
When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is often only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value variations in the event a borrower defaults.
Banks were accepting down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the worth of the house is less than the loan balance.
PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender consumes all the deficits.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can homebuyers refrain from bearing the expense of PMI?
The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, wise home owners can get off the hook a little early.
It can take many years to arrive at the point where the principal is just 20% of the original amount borrowed, so it's crucial to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Even when nationwide trends indicate plummeting home values, be aware that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have gained equity before things calmed down.
An accredited, 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 recognize the market dynamics of their area. At Ken Colley & Associates Inc., we're experts at determining value trends in Fort Smith, Sebastian County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often cancel the PMI with little trouble. At which time, the home owner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: