Have equity in your home? Want a lower payment? An appraisal from Mathes Appraisals LLC can help you get rid of your PMI.A 20% down payment is usually accepted when buying a house. The lender's risk is often only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuations on the chance that a purchaser doesn't pay.The market was accepting down payments as low as 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the value of the home is less than what is owed on the loan. PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the costs, PMI is lucrative for the lender because they secure the money, and they are covered if the borrower defaults.
How home buyers can keep from bearing the expense of PMIThe Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, savvy homeowners can get off the hook ahead of time.It can take several years to reach the point where the principal is just 80% of the original amount borrowed, so it's essential to know how your Kentucky home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends predict decreasing home values, be aware that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have gained equity before things declined. An accredited, Kentucky licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Mathes Appraisals LLC, we know when property values have risen or declined. We're experts at identifying value trends in Louisville, Jefferson County, and surrounding areas. Faced with data from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that 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
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