Let Appraisals Plus help you determine if you can get rid of your PMI

It's typically known that a 20% down payment is common when getting a mortgage. Considering the liability for the lender is usually only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value changeson the chance that a purchaser is unable to pay.

The market was accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. A lender is able to manage the additional risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy protects the lender if a borrower defaults on the loan and the value of the house is lower than the balance of the loan.

PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. Contradictory to a piggyback loan where the lender absorbs all the damages, PMI is lucrative for the lender because they collect the money, and they get the money 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 homebuyers can avoid bearing the expense of PMI

With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent. So, wise home owners can get off the hook sooner than expected.

It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've achieved over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends forecast plunging home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home may have gained equity before things calmed down.

An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to know the market dynamics of their area. At Appraisals Plus, we're masters at analyzing value trends in Philadelphia, Philadelphia County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will generally drop the PMI with little effort. At which time, the homeowner 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