Everyday Appraisal can help you remove your Private Mortgage Insurance

When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is often only the remainder between the home value and the amount due on the loan, so the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser is unable to pay.

During the recent mortgage boom of the last decade, it was common to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan guards the lender if a borrower is unable to pay on the loan and the market price of the property is less than what the borrower still owes on the loan.

PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they obtain the money, and they get paid if the borrower defaults.

How can a buyer keep from bearing the cost of PMI?

With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent. So, acute homeowners can get off the hook ahead of time.

It can take many years to reach the point where the principal is only 20% of the original amount of the loan, so it's essential to know how your home has increased in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends indicate declining home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home might have gained equity before things cooled off.

The hardest thing for almost all home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to understand the market dynamics of their area. At Everyday Appraisal, we know when property values have risen or declined. We're experts at recognizing value trends in Bonney Lake, Pierce County and surrounding areas. When faced with data from an appraiser, the mortgage company will most often cancel the PMI with little effort. At which 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