Let South Shore Appraisals help you determine if you can eliminate your PMI

When buying a house, a 20% down payment is usually the standard. Because the liability for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and natural value fluctuationson the chance that a purchaser defaults.

Lenders were working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to handle the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplementary plan guards the lender if a borrower doesn't pay on the loan and the market price of the property is less than the loan balance.

PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. It's money-making for the lender because they obtain the money, and they get the money if the borrower doesn't pay, different from a piggyback loan where the lender consumes all the losses.

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

How can a homebuyer avoid paying PMI?

The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law promises that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, savvy home owners can get off the hook ahead of time.

It can take many years to reach the point where the principal is only 20% of the initial amount borrowed, so it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be heeding the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends predict falling home values, you should realize that real estate is local.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It is an appraiser's job to know the market dynamics of their area. At South Shore Appraisals, we're masters at pinpointing value trends in Schererville, Lake County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little effort. At that time, the homeowner 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