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Let ASAP Appraisal Group help you determine if you can cancel your PMI

A 20% down payment is usually accepted when buying a house. The lender's risk is usually only the difference between the home value and the amount outstanding on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and regular value changes in the event a borrower is unable to pay.

During the recent mortgage boom of the mid 2000s, it became common to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to manage the additional risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender in the event a borrower defaults on the loan and the market price of the property 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 rolled into the mortgage monthly payment and often isn't even tax deductible. It's favorable for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the costs.

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

How homebuyers can refrain from paying PMI

With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, smart home owners can get off the hook a little early.

Because it can take many years to get to the point where the principal is only 20% of the initial amount borrowed, it's necessary to know how your home has grown in value. After all, every bit of appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have acquired equity before things settled down, so even when nationwide trends forecast decreasing home values, you should realize that real estate is local.

The hardest thing for many homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At ASAP Appraisal Group, we're masters at analyzing value trends in Lakeland, Polk County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often remove the PMI with little trouble. At that time, the home owner 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