profile picture

Let Barnstable/Plymouth Appraisal Services help you determine if you can get rid of your PMI

A 20% down payment is usually accepted when getting a mortgage. Because the risk for the lender is usually only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and natural value changeson the chance that a purchaser doesn't pay.

The market was taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower defaults on the loan and the value of the home is less than the balance of the loan.

Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender consumes all the deficits, PMI is favorable for the lender because they acquire the money, and they get the money 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 homeowners prevent paying PMI?

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Savvy home owners can get off the hook beforehand. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.

Since it can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home could have gained equity before things settled down, so even when nationwide trends indicate falling home values, you should understand that real estate is local.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Barnstable/Plymouth Appraisal Services, we're experts at pinpointing value trends in Buzzards Bay, Barnstable County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At that time, the homeowner 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