Allen Appraisal Service can help you remove your Private Mortgage Insurance

When buying a house, a 20% down payment is usually the standard. Because the risk for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and natural value changeson the chance that a borrower is unable to pay.

During the recent mortgage boom of the mid 2000s, it became customary to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the market price of the home is lower than the balance of the loan.

PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and many times isn't even tax deductible. It's lucrative for the lender because they secure the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender consumes all the costs.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How home buyers can avoid bearing the expense of PMI

The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook sooner than expected.

Considering it can take many years to reach the point where the principal is only 20% of the original loan amount, it's necessary to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not be following the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends forecast declining home values, you should realize that real estate is local.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Allen Appraisal Service, we're masters at identifying value trends in Washington, Washington County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At that time, the homeowner can retain 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

Paying PMI?

Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.

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