Race Appraisal Services, LLC can help you remove your Private Mortgage Insurance

It's generally understood that a 20% down payment is the standard when getting a mortgage. Considering the risk for the lender is generally only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and typical value variationson the chance that a purchaser doesn't pay.

During the recent mortgage upturn of the mid 2000s, it became customary to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy covers the lender if a borrower is unable to pay on the loan and the worth of the home is less than the balance of the loan.

Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. Separate from a piggyback loan where the lender takes in all the costs, PMI is beneficial for the lender because they acquire the money, and they receive payment 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 can homeowners keep from paying PMI?

The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Wise home owners can get off the hook sooner than expected. The law pledges that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches only 80 percent.

Since it can take many years to get to the point where the principal is just 20% of the initial amount borrowed, it's important to know how your home has grown in value. After all, every bit of appreciation you've achieved 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% threshold? Even when nationwide trends predict plummeting home values, understand that real estate is local. Your neighborhood might not be following the national trends and/or your home could have secured equity before things simmered down.

The difficult thing for many home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to know the market dynamics of their area. At Race Appraisal Services, LLC, we know when property values have risen or declined. We're experts at identifying value trends in East Longmeadow, Hampden County and surrounding areas. Faced with data from an appraiser, the mortgage company will often drop 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

Paying PMI?

Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.

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