Mitchell Appraisals can help you remove your Private Mortgage Insurance

When purchasing a home, a 20% down payment is typically the standard. The lender's liability is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value variations on the chance that a purchaser is unable to pay.

Banks were taking 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 increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the worth of the house is less than the balance of the loan.

Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible, PMI is costly to a borrower. It's beneficial for the lender because they collect the money, and they get paid if the borrower doesn't pay, opposite from 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 buyers can refrain from bearing the cost of PMI

The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law designates that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent. So, savvy home owners can get off the hook a little early.

Since it can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have acquired equity before things calmed down, so even when nationwide trends hint at plummeting home values, you should realize that real estate is local.

The difficult thing for most homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Mitchell Appraisals, we're experts at identifying value trends in Navarre, Santa Rosa County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally cancel the PMI with little anxiety. At which time, the home owner can retain 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