Let Race Appraisal Services, LLC help you learn if you can cancel your PMI

It's generally known that a 20% down payment is accepted when purchasing a home. Since the liability for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and natural value changesin the event a purchaser defaults.

During the recent mortgage upturn 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 added risk of the small down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower defaults on the loan and the market price of the property is less than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and generally isn't even tax deductible, PMI is costly to a borrower. It's lucrative for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, different from a piggyback loan where the lender absorbs all the deficits.

How homebuyers can refrain from paying PMI

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees that, upon request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, acute home owners can get off the hook sooner than expected.

Because it can take many years to reach 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, all of the appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends hint at falling home values, you should understand that real estate is local.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At Race Appraisal Services, LLC, we're masters at analyzing value trends in East Longmeadow, Hampden 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 usually drop the PMI with little anxiety. At which time, the home owner 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