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Amerappraise, LLC can help you remove your Private Mortgage Insurance

It's widely understood that a 20% down payment is the standard when buying a house. The lender's risk is usually only the remainder between the home value and the sum outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and natural value changes in the event a purchaser doesn't pay.

During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This additional plan protects the lender in case 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.

PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible. Different from a piggyback loan where the lender takes in all the damages, PMI is advantageous for the lender because they collect the money, and they receive payment if the borrower defaults.

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

How can a homebuyer keep from bearing the cost of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Savvy home owners can get off the hook sooner than expected. The law states that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent.

Considering it can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things simmered down, so even when nationwide trends indicate plummeting home values, you should realize that real estate is local.

The hardest thing for many homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Amerappraise, LLC, we're masters at recognizing value trends in Bear, New Castle County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally cancel the PMI with little effort. At that time, the home owner can enjoy 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