Let Browning Appraisal help you figure out if you can get rid of your PMIWhen buying a house, a 20% down payment is usually the standard. The lender's only risk is often just the remainder between the home value and the balance outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and typical value fluctuations in the event a borrower is unable to pay.Banks were taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added plan protects the lender in case a borrower is unable to pay on the loan and the market price of the house is lower than the balance of the loan. PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and on many occasions isn't even tax deductible. It's advantageous for the lender because they secure the money, and they are covered if the borrower is unable to pay, separate from a piggyback loan where the lender absorbs all the deficits.
How can homeowners prevent bearing the cost of PMI?The Homeowners Protection Act of 1998 obligates the lenders on the majority of loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Acute home owners can get off the hook a little earlier. The law pledges that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent.Since it can take a significant number of years to get to the point where the principal is only 80% of the original amount borrowed, it's important to know how your Kentucky home has appreciated in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood may not follow national trends and/or your home may have gained equity before things simmered down. So even when nationwide trends hint at a reduction in home values, you should know most importantly that real estate is local. The toughest thing for most homeowners 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 Browning Appraisal, we know when property values have risen or declined. We're masters at recognizing value trends in Frankfort, Franklin County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At that time, the home owner can enjoy 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
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