Have equity in your home? Want a lower payment? An appraisal from Colliver Appraisal Service can help you get rid of your PMI.A 20% down payment is usually accepted when purchasing a home. Since the risk for the lender is oftentimes only the remainder between the home value and the amount due on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value variations in the event a borrower defaults.
During the recent mortgage upturn that our country recently experienced, it was customary to see lenders making deals with down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower is unable to pay on the loan and the value of the house is less than what the borrower still owes on the loan.
PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. It's favorable for the lender because they secure the money, and they get the money if the borrower doesn't pay, in contrast to a piggyback loan where the lender consumes all the deficits.
How can homebuyers keep from bearing the cost of PMI?The Homeowners Protection Act of 1998 forces the lenders on the majority of loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Savvy home owners can get off the hook beforehand. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent.
Because it can take several years to get to the point where the principal is only 80% of the initial amount borrowed, it's crucial to know how your Kentucky home has increased in value. After all, any appreciation you've obtained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends predict decreasing home values, realize that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have acquired equity before things declined.
The hardest thing for most homeowners to figure out is whether their home equity has exceeded the 20% point. A certified, Kentucky licensed real estate appraiser can certainly help. It's an appraiser's job to recognize the market dynamics of their area. At Colliver Appraisal Service, we're experts at recognizing value trends in Lexington, Fayette County, and surrounding areas, and we know when property values have risen or declined. Faced with data 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:
Cancellation of Private Mortgage Insurance: Federal Law May Save You Hundreds of Dollars Each Year