Have equity in your home? Want a lower payment? An appraisal from KV Appraisal Service can help you get rid of your PMI.A 20% down payment is typically accepted when buying a house. The lender's only liability is typically just the remainder between the home value and the sum due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and natural value changes in the event a purchaser is unable to pay.During the recent mortgage upturn of the mid 2000s, it was customary to see lenders making deals with down payments of 10, 5 or even 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the market price of the property is lower than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender absorbs all the damages, PMI is lucrative for the lender because they collect the money, and they are covered if the borrower doesn't pay.
How home buyers can prevent bearing the cost of PMIThe Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, wise 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 initial amount borrowed, so it's important to know how your Montana home has appreciated in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not conform to national trends and/or your home could have secured equity before the economy declined. So even when nationwide trends forecast decreasing home values, you should realize that real estate is local. The hardest thing for almost all consumers to determine is just when their home's equity goes over the 20% point. An accredited, Montana licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At KV Appraisal Service, we're experts at pinpointing value trends in Conrad, Pondera County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually cancel the PMI with little trouble. At which time, the homeowner 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
|
||||||||||||||||||
