A. M. Appraisals can help you remove your Private Mortgage Insurance

When purchasing a home, a 20% down payment is usually the standard. The lender's liability is generally only the remainder between the home value and the sum remaining on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower defaults.

During the recent mortgage boom of the mid 2000s, it was customary to see lenders taking down payments of 10, 5 or often 0 percent. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan takes care of the lender if a borrower is unable to pay on the loan and the worth of the home is less than the loan balance.

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 is costly to a borrower. Separate from a piggyback loan where the lender absorbs all the damages, PMI is profitable for the lender because they collect the money, and they get the money if the borrower defaults.

How can a buyer keep from bearing the cost of PMI?

With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Wise homeowners can get off the hook beforehand. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.

Because it can take many years to get to the point where the principal is just 20% of the initial amount borrowed, it's crucial to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not be minding the national trends and/or your home may have gained equity before things settled down, so even when nationwide trends signify plummeting home values, you should understand that real estate is local.

The difficult thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At A. M. Appraisals, we're experts at recognizing value trends in West Columbia, Lexington County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will generally drop the PMI with little anxiety. At which 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