Let South Eastern Appraisal, Inc. help you decide if you can get rid of your PMIA 20% down payment is usually accepted when getting a mortgage. Considering the liability for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower defaults.
Banks were taking down payments as low as 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than the loan balance.
Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. Separate from a piggyback loan where the lender consumes all the deficits, PMI is advantageous for the lender because they acquire the money, and they receive payment if the borrower is unable to pay.
How home buyers can refrain from bearing the expense of PMIWith the passage of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on most loans. The law designates that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook ahead of time.
Considering it can take several years to reach the point where the principal is just 80% of the original loan amount, it's essential to know how your Kentucky home has grown in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not adhere to national trends and/or your home could have gained equity before the economy simmered down. So even when nationwide trends signify a reduction in home values, you should understand that real estate is local.
An accredited, Kentucky licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At South Eastern Appraisal, Inc., we're experts at pinpointing value trends in Somerset, Pulaski County, and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At which time, the home owner can retain the savings from that point on.
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