Let Pierce Appraisal Services, LLC help you learn if you can eliminate your PMIIt's typically known that a 20% down payment is common when buying a house. Since the liability for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, selling the home again, and natural value changes in the event a borrower defaults.The market was taking down payments discounted to 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the market price of the home is less than what is owed on the loan. Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. Instead of a piggyback loan where the lender absorbs all the costs, PMI is advantageous for the lender because they collect the money, and they get paid if the borrower doesn't pay.
How can home buyers avoid bearing the expense of PMI?With the passage of The Homeowners Protection Act of 1998, lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on nearly all loans. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook ahead of time.Since it can take many years to reach the point where the principal is only 80% of the initial amount borrowed, it's important to know how your Kentucky home has appreciated in value. After all, all of the appreciation you've obtained over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not conform to national trends and/or your home might have acquired equity before things simmered down. So even when nationwide trends forecast declining home values, you should know most importantly that real estate is local. The difficult thing for many consumers to determine is just when their home's equity goes over the 20% point. An accredited, Kentucky licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At Pierce Appraisal Services, LLC, we're experts at analyzing value trends in Elizabethtown, Hardin County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At that time, the home owner can relish 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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