Hometown Appraiser, LLC can help you remove your Private Mortgage Insurance

It's generally known that a 20% down payment is common when purchasing a home. Since the liability for the lender is oftentimes only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and natural value variationsin the event a purchaser is unable to pay.

Lenders were working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan protects the lender in the event a borrower is unable to pay on the loan and the market price of the property is less than the balance of 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 generally isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they acquire the money, and they get the money if the borrower defaults.

How can home owners prevent bearing the cost of PMI?

The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Acute home owners can get off the hook a little earlier. The law stipulates that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.

It can take countless years to get to the point where the principal is just 20% of the original amount borrowed, so it's important to know how your home has increased in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends signify plummeting home values, understand that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have secured equity before things simmered down.

The hardest thing for most homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At Hometown Appraiser, LLC, we know when property values have risen or declined. We're masters at analyzing value trends in Ocean Isle Beach, Brunswick County and surrounding areas. Faced with figures from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At that time, the home owner 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