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Let Appraisal House, Inc. help you discover if you can eliminate your PMI

A 20% down payment is typically the standard when getting a mortgage. Considering the risk for the lender is generally only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuationsin the event a purchaser doesn't pay.

During the recent mortgage boom of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the value of the property is less than the loan balance.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be pricey to a borrower. Separate from a piggyback loan where the lender absorbs all the damages, PMI is lucrative for the lender because they acquire the money, and they get the money 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 prevent paying PMI?

The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel 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 earlier. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.

Considering it can take countless years to get to the point where the principal is only 20% of the initial amount of the loan, it's necessary to know how your home has appreciated in value. After all, any appreciation you've gained over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home may have acquired equity before things settled down, so even when nationwide trends signify falling home values, you should understand that real estate is local.

The hardest thing for most homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to understand the market dynamics of their area. At Appraisal House, Inc., we're masters at pinpointing value trends in Destin, Okaloosa County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often remove the PMI with little anxiety. 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