Have equity in your home? Want a lower payment? An appraisal from Cooper Appraisal Company, Inc. can help you get rid of your PMI.A 20% down payment is typically the standard when getting a mortgage. Since the risk for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and regular value fluctuations in the event a purchaser is unable to pay.
During the recent mortgage upturn of the last decade, it became widespread to see lenders only asking for down payments of 10, 5, 3 or often 0 percent. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added plan covers the lender in case a borrower is unable to pay on the loan and the market price of the home is less than the balance of the loan.
PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible. Different from a piggyback loan where the lender takes in all the damages, PMI is advantageous for the lender because they obtain the money, and they are covered if the borrower is unable to pay.
How homebuyers can keep from paying PMIWith the implementation of The Homeowners Protection Act of 1998, lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount on nearly all loans. Smart home owners can get off the hook ahead of time. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent.
Because it can take several years to reach the point where the principal is just 80% of the initial amount borrowed, it's necessary to know how your Arkansas home has increased in value. After all, all of the appreciation you've gained over the years counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not follow national trends and/or your home may have acquired equity before the economy declined. So even when nationwide trends hint at a reduction in home values, you should know most importantly that real estate is local.
An accredited, Arkansas licensed real estate appraiser can help home owners figure out just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Cooper Appraisal Company, Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in Greenbrier, Faulkner County, and surrounding areas. Faced with information from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. 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: