Let Daniel Todd Appraisal Services, LLC help you learn if you can get rid of your PMI

A 20% down payment is usually the standard when buying a house. Since the liability for the lender is oftentimes 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, selling the home again, and natural value changesin the event a purchaser is unable to pay.

Lenders were taking down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower doesn't pay on the loan and the value of the home is lower than what is owed on the loan.

Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible, PMI is costly to a borrower. It's money-making for the lender because they collect the money, and they receive payment if the borrower doesn't pay, contradictory to a piggyback loan where the lender consumes all the damages.

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

How home owners can keep from bearing the cost of PMI

The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law guarantees 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.

It can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has appreciated in value. After all, any appreciation you've acquired over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends forecast plummeting home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have secured equity before things cooled off.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Daniel Todd Appraisal Services, LLC, we're masters at recognizing value trends in Bloomington, Monroe County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally 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