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Let CMG Appraisals help you discover if you can eliminate your PMI

A 20% down payment is typically the standard when purchasing a home. The lender's risk is oftentimes only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value changes in the event a purchaser doesn't pay.

During the recent mortgage upturn of the last decade, it became customary to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender manage the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower is unable to pay on the loan and the worth of the home is lower than the loan balance.

Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. It's lucrative for the lender because they acquire the money, and they get the money if the borrower defaults, different from a piggyback loan where the lender absorbs all the deficits.

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 nearly all loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Keen home owners can get off the hook sooner than expected. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.

Considering it can take countless years to reach the point where the principal is only 20% of the initial loan amount, it's crucial to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends hint at decreasing home values, understand that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have secured equity before things calmed down.

A certified, licensed real estate appraiser can help home owners 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 recognize the market dynamics of our area. At CMG Appraisals, we know when property values have risen or declined. We're masters at pinpointing value trends in Jensen Beach, Martin County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually drop the PMI with little effort. At which time, the home owner can relish 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