DenverT Appraisal can help you remove your Private Mortgage Insurance

When getting a mortgage, a 20% down payment is typically the standard. Considering the liability for the lender is generally only the difference between the home value and the sum due on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value variationson the chance that a purchaser doesn't pay.

Banks were accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the worth of the property is lower than the balance of the loan.

Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI can be pricey to a borrower. It's beneficial for the lender because they obtain the money, and they get paid if the borrower doesn't pay, unlike a piggyback loan where the lender absorbs all the deficits.

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

How can home buyers refrain from paying PMI?

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, keen homeowners can get off the hook ahead of time.

Since it can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, it's important to know how your home has increased in value. After all, any appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be heeding the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends predict plummeting home values, you should understand that real estate is local.

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 tough thing to know. As appraisers, it's our job to understand the market dynamics of our area. At DenverT Appraisal, we're experts at determining value trends in West End, Moore County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At which 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