Let Floyd Appraisal Works help you determine if you can cancel your PMI

A 20% down payment is usually the standard when buying a house. Considering the risk for the lender is generally only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and typical value variationson the chance that a borrower defaults.

During the recent mortgage boom of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or sometimes 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender in case a borrower is unable to pay on the loan and the value of the property is lower than the balance of the loan.

Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender absorbs all the deficits, PMI is money-making for the lender because they acquire the money, and they receive payment if the borrower doesn't pay.

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

How can a buyer avoid bearing the cost of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Keen homeowners can get off the hook a little early. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.

Considering it can take many years to reach the point where the principal is just 20% of the initial amount borrowed, it's necessary to know how your home has increased in value. After all, any appreciation you've obtained over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Even when nationwide trends signify declining home values, be aware that real estate is local. Your neighborhood may not be following the national trends and/or your home might have secured equity before things settled down.

The toughest thing for most homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Floyd Appraisal Works, we know when property values have risen or declined. We're masters at analyzing value trends in Hohenwald, Lewis County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often cancel the PMI with little effort. At which 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