Realty Valuators, Inc. can help you remove your Private Mortgage Insurance

When purchasing a home, a 20% down payment is typically the standard. The lender's liability is often only the difference between the home value and the amount due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and regular value variations in the event a borrower defaults.

Lenders were taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender if a borrower is unable to pay on the loan and the market price of the house 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 generally isn't even tax deductible, PMI is costly to a borrower. Separate from a piggyback loan where the lender absorbs all the deficits, PMI is beneficial for the lender because they secure the money, and they get the money if the borrower is unable to pay.

How can homebuyers prevent bearing the expense of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Keen homeowners can get off the hook a little early. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent.

Because it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's crucial to know how your home has appreciated in value. After all, any appreciation you've gained over time counts towards dismissing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends signify falling home values, realize that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have acquired equity before things cooled off.

The toughest thing for most home owners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At Realty Valuators, Inc., we know when property values have risen or declined. We're masters at determining value trends in Valrico, Hillsborough County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually remove the PMI with little trouble. 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