Appraisal Care can help you remove your Private Mortgage Insurance

A 20% down payment is typically accepted when buying a house. Considering the liability for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value changesin the event a purchaser is unable to pay.

During the recent mortgage boom of the mid 2000s, it became common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy covers the lender in case a borrower is unable to pay on the loan and the value of the home is less than what is owed on the loan.

PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. It's beneficial for the lender because they collect the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender consumes all the damages.

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

How can a homeowner avoid bearing the expense of PMI?

With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Acute homeowners can get off the hook a little earlier. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.

It can take many years to arrive at the point where the principal is only 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 accomplished over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends predict declining home values, understand that real estate is local. Your neighborhood might not be heeding the national trends and/or your home may have acquired equity before things cooled off.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Appraisal Care, we know when property values have risen or declined. We're experts at determining value trends in Long Beach, Los Angeles County and surrounding areas. Faced with information from an appraiser, the mortgage company will generally eliminate the PMI with little anxiety. 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