Austin Appraiser's, Inc. can help you remove your Private Mortgage Insurance

It's typically known that a 20% down payment is the standard when purchasing a home. Since the risk for the lender is usually only the difference between the home value and the sum remaining on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and regular value fluctuationsin the event a borrower is unable to pay.

During the recent mortgage upturn of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to manage the added risk of the low down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower doesn't pay on the loan and the worth of the house is less than what the borrower still owes on the loan.

PMI is costly 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. Unlike a piggyback loan where the lender absorbs all the losses, PMI is money-making for the lender because they obtain the money, and they get paid if the borrower is unable to pay.

How home buyers can keep from paying PMI

With the implementation 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 equals 78 percent of the beginning loan amount. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook ahead of time.

It can take many years to arrive at the point where the principal is only 20% of the original amount borrowed, so it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Even when nationwide trends hint at declining home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home may have secured equity before things settled down.

An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to recognize the market dynamics of our area. At Austin Appraiser's, Inc., we know when property values have risen or declined. We're masters at determining value trends in Fleming Island, Clay County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often drop the PMI with little effort. 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