Have equity in your home? Want a lower payment? An appraisal from Flint Hills Appraisals can help you get rid of your PMI.A 20% down payment is usually the standard when getting a mortgage. The lender's only risk is often just the remainder between the home value and the amount outstanding on the loan, so the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuations in the event a purchaser is unable to pay.
During the recent mortgage boom of the mid 2000s, it was widespread to see lenders only asking for down payments of 10, 5, 3 or sometimes 0 percent. A lender is able to endure the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI guards 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.
Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. Instead of a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they acquire the money, and they receive payment if the borrower doesn't pay.
How homebuyers can keep from bearing the expense of PMIWith the implementation 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 primary loan amount on most loans. Keen homeowners can get off the hook a little earlier. The law stipulates that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.
It can take many years to arrive at the point where the principal is just 80% of the initial loan amount, so it's crucial to know how your Kansas home has grown in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends signify falling home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have acquired equity before things cooled off.
The difficult thing for almost all consumers to figure out is just when their home's equity goes over the 20% point. An accredited, Kansas licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Flint Hills Appraisals, we know when property values have risen or declined. We're masters at identifying value trends in Manhattan, Riley County, and surrounding areas. When faced with data from an appraiser, the mortgage company will most often cancel the PMI with little effort. At that time, the homeowner 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