Let The Appraisal Firm help you figure out if you can get rid of your PMI

It's typically inferred that a 20% down payment is the standard when purchasing a home. Considering the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuationsin the event a borrower defaults.

Banks were accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added plan protects the lender if a borrower doesn't pay on the loan and the worth of the house is less than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI can be pricey to a borrower. It's lucrative for the lender because they secure the money, and they get the money if the borrower defaults, separate from a piggyback loan where the lender takes in all the costs.

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

How can home buyers prevent bearing the cost of PMI?

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise homeowners can get off the hook sooner than expected. The law guarantees that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.

Considering it can take countless years to get to the point where the principal is only 20% of the original amount borrowed, it's important to know how your home has increased in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home may have gained equity before things simmered down, so even when nationwide trends indicate plummeting home values, you should realize that real estate is local.

The toughest thing for many homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to keep up with the market dynamics of their area. At The Appraisal Firm, we're experts at recognizing value trends in Escondido, San Diego County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually drop the PMI with little effort. At that time, the homeowner can delight in 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