A. M. Appraisals can help you remove your Private Mortgage Insurance

It's largely understood that a 20% down payment is common when getting a mortgage. Because the risk for the lender is usually 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 typical value changeson the chance that a purchaser doesn't pay.

During the recent mortgage boom of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. A lender is able to manage the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower defaults on the loan and the value of the house is lower than the balance of the loan.

PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. It's money-making for the lender because they collect the money, and they get paid if the borrower is unable to pay, opposite from a piggyback loan where the lender absorbs all the costs.

How can homeowners refrain from bearing the expense of PMI?

With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law promises that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, smart home owners can get off the hook sooner than expected.

Considering it can take countless years to arrive at the point where the principal is only 20% of the initial loan amount, it's important to know how your home has increased in value. After all, all of the appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Even when nationwide trends predict plunging home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home might have gained equity before things calmed down.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At A. M. Appraisals, we're experts at pinpointing value trends in West Columbia, Lexington 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 effort. At that time, the homeowner 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