Have equity in your home? Want a lower payment? An appraisal from Abell Appraisal Services, Inc. can help you get rid of your PMI.When getting a mortgage, a 20% down payment is typically the standard. Because the risk for the lender is usually only the difference between the home value and the amount remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and typical value fluctuations in the event a purchaser is unable to pay.
During the recent mortgage boom of the last decade, it became customary to see lenders reducing down payments to 10, 5, 3 or even 0 percent. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender if a borrower is unable to pay on the loan and the market price of the home is less than what the borrower still owes on 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 frequently isn't even tax deductible. Instead of a piggyback loan where the lender takes in all the costs, PMI is beneficial for the lender because they acquire the money, and they get paid if the borrower defaults.
How home owners can refrain from paying PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are obligated 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 promises that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, keen home owners can get off the hook a little earlier.
It can take many years to get to the point where the principal is only 80% of the original amount of the loan, so it's crucial to know how your Kentucky home has grown in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not conform to national trends and/or your home could have acquired equity before the economy declined. So even when nationwide trends indicate decreasing home values, you should know most importantly that real estate is local.
A certified, Kentucky licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At Abell Appraisal Services, Inc., we're masters at pinpointing value trends in Louisville, Jefferson County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often cancel the PMI with little effort. At that time, the home owner can delight in the savings from that point on.
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