profile picture

Have equity in your home? Want a lower payment? An appraisal from Amerappraise, LLC can help you get rid of your PMI.

A 20% down payment is usually accepted when buying a house. The lender's liability is usually only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, selling the home again, and regular value changes on the chance that a borrower doesn't pay.

Lenders were working with down payments as low as 10, 5 and often 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. This supplemental policy takes care of the lender if a borrower is unable to pay on the loan and the value of the home is lower than the loan balance.

Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. Opposite from a piggyback loan where the lender takes in all the costs, PMI is money-making for the lender because they acquire the money, and they receive payment if the borrower is unable to pay.

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

How can a homeowner keep from paying PMI?

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy home owners can get off the hook a little early. The law guarantees that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.

Because it can take countless years to get to the point where the principal is only 20% of the original amount borrowed, it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends indicate falling home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home could have gained equity before things cooled off.

The hardest thing for many home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Amerappraise, LLC, we know when property values have risen or declined. We're masters at recognizing value trends in Bear, New Castle County and surrounding areas. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little effort. At that 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