Johnson Appraisal Co. can help you remove your Private Mortgage Insurance

When buying a house, a 20% down payment is usually the standard. Considering the liability for the lender is usually only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, reselling the home, and natural value variationson the chance that a purchaser is unable to pay.

During the recent mortgage boom of the mid 2000s, it became common to see lenders requiring 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. PMI guards the lender in case a borrower defaults on the loan and the worth of the house is less than the loan balance.

PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower defaults.

How can home owners keep from paying PMI?

With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent. So, keen home owners can get off the hook ahead of time.

Since it can take countless years to reach the point where the principal is only 20% of the original amount borrowed, it's essential to know how your home has increased in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends hint at plummeting home values, realize 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 simmered down.

The hardest thing for most homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At Johnson Appraisal Co., we know when property values have risen or declined. We're experts at determining value trends in Tucson, Pima County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually drop the PMI with little trouble. At that time, the home owner can retain 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