Meade & Associates can help you remove your Private Mortgage InsuranceIt's generally understood that a 20% down payment is common when getting a mortgage. Since the risk for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and regular value changes on the chance that a borrower doesn't pay.The market was working with down payments dropping to 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the market price of the house is less than the balance of the loan. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI is costly to a borrower. As opposed to a piggyback loan where the lender consumes all the deficits, PMI is lucrative for the lender because they obtain the money, and they get paid if the borrower defaults.
How can a homebuyer keep from paying PMI?The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Keen home owners can get off the hook a little early. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.It can take many years to reach the point where the principal is just 80% of the original amount borrowed, so it's essential to know how your Kentucky home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends forecast lower overall home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home could have acquired equity before things declined. The hardest thing for many consumers to figure out is whether their home equity has exceeded the 20% point. An accredited, Kentucky licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At Meade & Associates, we know when property values have risen or declined. We're masters at analyzing value trends in Ft Mitchell, Kenton County, and surrounding areas. When faced with data from an appraiser, the mortgage company will most often remove the PMI with little effort. At which 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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