Mitchell Appraisals can help you remove your Private Mortgage Insurance

When buying a house, a 20% down payment is usually the standard. The lender's risk is usually only the difference between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and regular value changes in the event a purchaser defaults.

The market was working with down payments as low as 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added plan takes care of the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than the loan balance.

PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is profitable for the lender because they collect the money, and they receive payment 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 can buyers prevent bearing the cost of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, wise home owners can get off the hook a little early.

Because it can take many years to arrive at the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends hint at plunging home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have acquired equity before things simmered down.

The toughest thing for almost all homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Mitchell Appraisals, we're masters at pinpointing value trends in Navarre, Santa Rosa County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often drop the PMI with little trouble. 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