Let Hometown Appraiser, LLC help you determine if you can cancel your PMI

It's typically inferred that a 20% down payment is accepted when getting a mortgage. Since the risk for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the charges of foreclosure, reselling the home, and typical value changeson the chance that a borrower doesn't pay.

Banks were working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary policy protects the lender if a borrower is unable to pay on the loan and the market price of the house is lower than what the borrower still owes on the loan.

PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender absorbs all the deficits, PMI is beneficial for the lender because they obtain the money, and they get paid if the borrower is unable to pay.

How homeowners can avoid bearing the expense of PMI

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, acute home owners can get off the hook ahead of time.

It can take many years to get to the point where the principal is only 20% of the initial amount borrowed, so it's essential to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends predict decreasing 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 goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Hometown Appraiser, LLC, we're masters at pinpointing value trends in Ocean Isle Beach, Brunswick 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 remove the PMI with little trouble. 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