Let Ken Colley & Associates Inc. help you discover if you can get rid of your PMI
It's largely understood that a 20% down payment is accepted when buying a house. The lender's liability is generally only the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuations on the chance that a purchaser is unable to pay.
The market was taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. 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 if a borrower defaults on the loan and the value of the house is lower than the balance of the loan.
PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's money-making for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the losses.
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.
How can a home buyer avoid bearing the cost of PMI?
With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy homeowners can get off the hook sooner than expected. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.
Considering it can take many years to reach the point where the principal is just 20% of the original amount borrowed, it's important to know how your home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be adhering to the national trends and/or your home could have secured equity before things cooled off, so even when nationwide trends indicate plunging home values, you should realize that real estate is local.
An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At Ken Colley & Associates Inc., we're masters at analyzing 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 usually remove the PMI with little trouble. 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: