Have equity in your home? Want a lower payment? An appraisal from Hasson Appraisals can help you get rid of your PMI.A 20% down payment is usually the standard when buying a house. Considering the risk for the lender is usually only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value fluctuations in the event a borrower doesn't pay.
Lenders were working with down payments dropping to 10, 5 and frequently 0 percent during the mortgage boom of the last decade. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the value of the home is less than what the borrower still owes on the loan.
Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. Different from a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they obtain the money, and they receive payment if the borrower is unable to pay.
How can home owners keep from bearing the cost of PMI?As a result of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, keen home owners can get off the hook a little early.
Considering it can take several years to reach the point where the principal is only 80% of the initial amount of the loan, it's crucial to know how your Kentucky home has grown in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends hint at declining home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home may have secured equity before things cooled off.
The toughest thing for many people to figure out is whether their home equity has exceeded the 20% point. A certified, Kentucky licensed real estate appraiser can surely help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At Hasson Appraisals, we know when property values have risen or declined. We're masters at determining value trends in Louisville, Jefferson County, and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often drop the PMI with little trouble. At that 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: