Let Amerigroup Appraisals help you discover if you can cancel your PMIWhen buying a house, a 20% down payment is typically the standard. The lender's only liability is generally just the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value changes on the chance that a purchaser is unable to pay.
The market was taking down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental plan protects the lender in case a borrower defaults on the loan and the value of the home is lower than what the borrower still owes on the loan.
PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the losses, PMI is lucrative for the lender because they obtain the money, and they get the money if the borrower defaults.
How can homebuyers refrain from bearing the cost of PMI?The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook sooner than expected.
It can take several years to get to the point where the principal is just 80% of the initial amount of the loan, so it's crucial to know how your Kentucky home has grown in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not conform to national trends and/or your home could have acquired equity before the economy cooled off. So even when nationwide trends predict decreasing home values, you should understand that real estate is local.
The difficult thing for almost all consumers to figure out is whether their home equity has exceeded the 20% point. An accredited, Kentucky licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At Amerigroup Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Georgetown, Scott County, and surrounding areas. Faced with information from an appraiser, the mortgage company will generally drop the PMI with little trouble. At which time, the homeowner can relish the savings from that point on.
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