Let Hometown Appraiser, LLC help you determine if you can get rid of your PMI

It's typically known that a 20% down payment is common when getting a mortgage. Since the liability for the lender is usually only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and regular value fluctuationsin the event a borrower is unable to pay.

The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the value of the house is less than what is owed on the loan.

PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the losses, PMI is beneficial for the lender because they collect the money, and they get the money if the borrower doesn't pay.

How can a homeowner prevent bearing the expense of PMI?

With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law designates that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent. So, wise homeowners can get off the hook a little earlier.

It can take countless years to reach the point where the principal is just 20% of the initial loan amount, so it's necessary to know how your home has increased in value. After all, any appreciation you've achieved over time counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be minding the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends indicate falling home values, you should realize that real estate is local.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Hometown Appraiser, LLC, we're experts at determining value trends in Ocean Isle Beach, Brunswick County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will often drop the PMI with little effort. At which 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