The Appraisal Shoppe, Inc. can help you remove your Private Mortgage Insurance

When buying a house, a 20% down payment is usually the standard. The lender's liability is usually only the remainder between the home value and the sum due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value variations in the event a borrower defaults.

During the recent mortgage upturn of the mid 2000s, it was customary to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the worth of the house is less than what is owed on the loan.

PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they secure the money, and they get paid if the borrower is unable to pay.

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

How buyers can keep from bearing the cost of PMI

The Homeowners Protection Act of 1998 requires the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook sooner than expected.

Because it can take many years to arrive at the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has increased in value. After all, all of the appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends forecast declining home values, you should realize that real estate is local.

The difficult thing for most home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At The Appraisal Shoppe, Inc., we're experts at analyzing value trends in Virginia Beach, Virginia Beach City County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. 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