Let Mike Noble Appraisals help you figure out if you can cancel your PMI

A 20% down payment is typically the standard when purchasing a home. The lender's risk is oftentimes only the remainder between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and typical value fluctuations on the chance that a purchaser doesn't pay.

The market was accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. A lender is able to endure the added risk of the small down payment with Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the value of the home is lower than what is owed on the loan.

PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. Opposite from a piggyback loan where the lender takes in all the damages, PMI is profitable for the lender because they secure the money, and they receive payment if the borrower defaults.

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

How can home owners avoid paying PMI?

The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, keen homeowners can get off the hook sooner than expected.

Since it can take countless years to get to the point where the principal is only 20% of the original loan amount, it's necessary to know how your home has increased in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So why pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends predict declining home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home could have secured equity before things cooled off.

The hardest thing for almost all home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. It is an appraiser's job to recognize the market dynamics of their area. At Mike Noble Appraisals, we're experts at pinpointing value trends in Montgomery, Elmore County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often eliminate the PMI with little effort. At that 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