Let Premier Appraisal of SoCal help you discover if you can get rid of your PMI

When buying a house, a 20% down payment is typically the standard. The lender's risk is often only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and typical value changes in the event a purchaser defaults.

The market was working with 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 low down payment with Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the market price of the home is less than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender takes in all the damages, PMI is beneficial for the lender because they acquire the money, and they get the money if the borrower doesn't pay.

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

How can home owners refrain from bearing the cost of PMI?

With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Acute home owners can get off the hook ahead of time. The law stipulates that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.

It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has increased in value. After all, all of the appreciation you've acquired over time counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Even when nationwide trends hint at plummeting home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home might have acquired equity before things cooled off.

The hardest thing for most home owners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to know the market dynamics of their area. At Premier Appraisal of SoCal, we're experts at determining value trends in Mission Viejo, Orange County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little effort. At that 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