Astute Appraisals, Inc. can help you remove your Private Mortgage Insurance

When purchasing a home, a 20% down payment is usually the standard. Because the liability for the lender is generally only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and natural value changeson the chance that a borrower is unable to pay.

Lenders were taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the additional 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 value of the home is less than what the borrower still owes on the loan.

Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI can be costly to a borrower. It's favorable for the lender because they obtain the money, and they receive payment if the borrower is unable to pay, opposite from a piggyback loan where the lender takes in all the losses.

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

How can a home buyer prevent bearing the cost of PMI?

The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Acute homeowners can get off the hook ahead of time. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.

Because it can take countless years to arrive at the point where the principal is only 20% of the original amount borrowed, it's essential to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be following the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends signify decreasing home values, you should understand that real estate is local.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At Astute Appraisals, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Columbia, Howard County and surrounding areas. When faced with data from an appraiser, the mortgage company will generally remove the PMI with little effort. At that 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