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

It's typically known that a 20% down payment is common when getting a mortgage. Considering the liability for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuationsin the event a borrower doesn't pay.

During the recent mortgage boom of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional plan protects the lender if a borrower defaults on the loan and the worth of the house is less than the balance of the loan.

PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible. Unlike a piggyback loan where the lender takes in all the costs, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower doesn't pay.

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

How home buyers can keep from bearing the expense of PMI

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy home owners can get off the hook a little early.

It can take countless years to get to the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has increased in value. After all, every bit of appreciation you've acquired over the years counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends forecast plummeting home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have acquired equity before things settled down.

The difficult thing for almost all homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Astute Appraisals, Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in Columbia, Howard County and surrounding areas. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little effort. At that time, the home owner can enjoy 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