Let Astute Appraisals, Inc. help you decide if you can eliminate your PMI

It's largely understood that a 20% down payment is common when getting a mortgage. Because the liability for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value changesin the event a purchaser defaults.

During the recent mortgage boom of the mid 2000s, it became customary to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. This added plan covers the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than the balance of the loan.

Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they collect the money, and they get paid if the borrower defaults, contradictory to 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 homeowners refrain from bearing the expense of PMI?

With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Smart homeowners can get off the hook ahead of time. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.

Since it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's crucial to know how your home has grown in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends signify falling home values, understand that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have secured equity before things calmed down.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Astute Appraisals, Inc., we're masters at analyzing value trends in Columbia, Howard 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 cancel the PMI with little trouble. At which time, the home owner 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