Let Allen Appraisal Service help you figure out if you can eliminate your PMI

When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is often only the difference between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuations in the event a borrower is unable to pay.

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 handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender if a borrower doesn't pay on the loan and the worth of the home is lower than the balance of the loan.

PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. It's money-making for the lender because they obtain the money, and they receive payment if the borrower doesn't pay, opposite 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 owners can keep from bearing the cost of PMI

The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, smart homeowners can get off the hook a little early.

Since it can take many years to reach the point where the principal is only 20% of the original amount borrowed, it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends predict declining home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things cooled off.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Allen Appraisal Service, we know when property values have risen or declined. We're experts at analyzing value trends in Washington, Washington County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that 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

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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