Let Premier Appraisals, Inc. help you decide if you can cancel your PMI

It's widely inferred that a 20% down payment is the standard when buying a house. The lender's risk is oftentimes only the difference between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and typical value variations on the chance that a purchaser is unable to pay.

Banks were taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan guards the lender in the event a borrower defaults on the loan and the worth of the property is lower than the balance of the loan.

PMI can be 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. It's money-making for the lender because they secure the money, and they get paid if the borrower defaults, different from a piggyback loan where the lender absorbs all the damages.

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

How can a home owner avoid bearing the expense of PMI?

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart homeowners can get off the hook a little early. The law states that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.

It can take many years to arrive at the point where the principal is just 20% of the initial amount borrowed, so it's crucial to know how your home has grown in value. After all, all of the appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Even when nationwide trends predict decreasing home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things cooled off.

An accredited, 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. As appraisers, it's our job to recognize the market dynamics of our area. At Premier Appraisals, Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in Nesconset, Suffolk County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At which 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