Have equity in your home? Want a lower payment? An appraisal from Sleadd Appraisals 502.291.5588 can help you get rid of your PMI.It's typically inferred that a 20% down payment is common when getting a mortgage. Considering the liability for the lender is generally only the remainder between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and typical value changes in the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it was widespread to see lenders only asking for down payments of 10, 5 or sometimes 0 percent. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower doesn't pay on the loan and the market price of the property is less than the balance of the loan.
PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the costs, PMI is favorable for the lender because they secure the money, and they receive payment if the borrower doesn't pay.
How can a home owner avoid paying PMI?With the passage of The Homeowners Protection Act of 1998, lenders are required to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on most loans. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, acute home owners can get off the hook a little early.
Since 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 appreciated in value. After all, any appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood might not follow national trends and/or your home might have acquired equity before things cooled off. So even when nationwide trends predict falling home values, you should understand that real estate is local.
The toughest thing for almost all consumers to figure out is whether their home equity has exceeded the 20% point. An accredited, Kentucky licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Sleadd Appraisals 502.291.5588, we're masters at recognizing value trends in Louisville, Jefferson County, and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally remove the PMI with little trouble. At which time, the home owner can retain 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