profile picture

Belles Appraisal Service, LLC can help you remove your Private Mortgage Insurance

A 20% down payment is usually accepted when buying a house. Considering the liability for the lender is often only the remainder between the home value and the amount due on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuationsin the event a borrower doesn't pay.

During the recent mortgage upturn of the last decade, it was customary to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event 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.

Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI is pricey to a borrower. Opposite from a piggyback loan where the lender consumes all the damages, PMI is profitable for the lender because they acquire the money, and they get paid if the borrower is unable to pay.

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

How homebuyers can refrain from paying PMI

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

It can take many years to arrive at the point where the principal is just 20% of the original loan amount, so it's crucial to know how your home has grown in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends hint at plunging home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have acquired equity before things settled down.

A certified, licensed real estate appraiser can help home owners 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 understand the market dynamics of our area. At Belles Appraisal Service, LLC, we're masters at analyzing value trends in Brush, Morgan County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often do away with 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