profile picture

English Spanish

ASAP Appraisal Group can help you remove your Private Mortgage Insurance

When getting a mortgage, a 20% down payment is usually the standard. Considering the liability for the lender is oftentimes only the difference between the home value and the amount due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value fluctuationsin the event a purchaser defaults.

During the recent mortgage upturn of the last decade, it was common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the additional risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender in the event a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan.

Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. It's advantageous for the lender because they acquire the money, and they get paid if the borrower defaults, different from a piggyback loan where the lender consumes all the costs.

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

How can a home buyer refrain from bearing the cost of PMI?

With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Keen homeowners can get off the hook ahead of time. The law states that, upon request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent.

It can take countless years to reach the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has grown in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends hint at decreasing home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home may have acquired equity before things settled down.

The toughest 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. It's an appraiser's job to know the market dynamics of their area. At ASAP Appraisal Group, we know when property values have risen or declined. We're experts at analyzing value trends in Lakeland, Polk County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little anxiety. At that 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