Let A. M. Appraisals help you learn if you can cancel your PMI

It's generally understood that a 20% down payment is common when getting a mortgage. Considering the liability for the lender is generally only the difference between the home value and the sum due on the loan, the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and regular value variationson the chance that a borrower doesn't pay.

The market was working with down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender if a borrower doesn't pay on the loan and the worth of the home is lower than the loan balance.

PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible. Different from a piggyback loan where the lender consumes all the deficits, PMI is money-making for the lender because they acquire the money, and they get the money if the borrower defaults.

How can homebuyers avoid paying PMI?

The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law states that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, acute homeowners can get off the hook ahead of time.

It can take many years to get to the point where the principal is just 20% of the original loan amount, so it's important to know how your home has grown in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying 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 calmed down, so even when nationwide trends forecast declining home values, you should understand that real estate is local.

The hardest thing for almost all homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At A. M. Appraisals, we're masters at determining value trends in West Columbia, Lexington 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 often do away with the PMI with little anxiety. At that time, the home owner can delight in 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