Have equity in your home? Want a lower payment? An appraisal from Woltermann Appraisal & Real Estate Service can help you get rid of your PMI.A 20% down payment is usually accepted when buying a house. Considering the risk for the lender is generally only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and typical value fluctuations on the chance that a borrower is unable to pay.
During the recent mortgage boom that our country recently experienced, it became widespread to see lenders only asking for down payments of 10, 5 or even 0 percent. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan guards 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 costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. It's favorable for the lender because they secure the money, and they receive payment if the borrower doesn't pay, different from a piggyback loan where the lender absorbs all the costs.
How can a homeowner prevent bearing the expense of PMI?The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy home owners can get off the hook beforehand. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.
It can take a significant number of years to get to the point where the principal is only 80% of the initial amount borrowed, so it's crucial to know how your Kentucky home has grown in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not adhere to national trends and/or your home could have acquired equity before things simmered down. So even when nationwide trends hint at declining home values, you should understand that real estate is local.
The toughest thing for almost all people to figure out is just when their home's equity rises above the 20% point. A certified, Kentucky licensed real estate appraiser can certainly help. It's an appraiser's job to keep up with the market dynamics of their area. At Woltermann Appraisal & Real Estate Service, we know when property values have risen or declined. We're masters at recognizing value trends in Wilder, Campbell County, and surrounding areas. When faced with information from an appraiser, the mortgage company will most often drop the PMI with little effort. At which time, the homeowner can relish the savings from that point on.
Want to learn more about PMI and the Homeowners Protection Act? Click this link: