Let People's Choice Appraisals help you decide if you can eliminate your PMI

When getting a mortgage, a 20% down payment is usually the standard. The lender's risk is oftentimes only the remainder between the home value and the sum due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and natural value variations in the event a purchaser is unable to pay.

The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the value of the home is lower than the balance of the loan.

Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Unlike a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they secure the money, and they get paid if the borrower defaults.

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

How can a homebuyer refrain from bearing the cost of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart homeowners can get off the hook a little earlier. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.

Considering it can take many years to reach the point where the principal is just 20% of the original loan amount, it's essential to know how your home has grown in value. After all, every bit of appreciation you've gained over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be following the national trends and/or your home may have acquired equity before things simmered down, so even when nationwide trends hint at plummeting home values, you should understand that real estate is local.

An accredited, 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 keep up with the market dynamics of our area. At People's Choice Appraisals, we know when property values have risen or declined. We're masters at recognizing value trends in Richlands, Onslow County and surrounding areas. When faced with data from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. At which time, the home owner 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