Ken Colley & Associates Inc. can help you remove your Private Mortgage InsuranceIt's widely known that a 20% down payment is the standard when buying a house. The lender's risk is generally only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and typical value variations on the chance that a borrower defaults. The market was working with down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional policy guards the lender if a borrower defaults on the loan and the value of the house is lower than what is owed on the loan. Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. It's lucrative for the lender because they collect the money, and they get the money if the borrower defaults, opposite from a piggyback loan where the lender takes in all the costs. 
Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI. How can a homeowner keep from paying PMI?With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law guarantees that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, keen home owners can get off the hook a little earlier. It can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's necessary to know how your 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 the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends signify falling home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have secured equity before things cooled off. The hardest thing for most homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At Ken Colley & Associates Inc., we're experts at analyzing value trends in Fort Smith, Sebastian County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often drop the PMI with little trouble. At that time, the home owner can retain the savings from that point on.
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