Corrie Appraisal & Consulting, Inc. can help you remove your Private Mortgage Insurance

It's widely inferred that a 20% down payment is the standard when buying a house. The lender's risk is generally only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value changes on the chance that a borrower doesn't pay.

During the recent mortgage upturn of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or even 0 percent. A lender is able to handle the increased risk of the low down payment with Private Mortgage Insurance or PMI. This additional plan covers the lender in case a borrower defaults on the loan and the worth of the home is lower than the loan balance.

PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible. It's lucrative for the lender because they obtain the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender takes in all the damages.

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

How can homeowners prevent bearing the cost of PMI?

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law states that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, keen homeowners can get off the hook a little early.

It can take many years to reach the point where the principal is just 20% of the original loan amount, so it's necessary to know how your home has grown in value. After all, all of the appreciation you've achieved over the years counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Even when nationwide trends forecast plunging home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home could have secured equity before things settled down.

The hardest thing for most 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. As appraisers, it's our job to recognize the market dynamics of our area. At Corrie Appraisal & Consulting, Inc., we know when property values have risen or declined. We're experts at identifying value trends in Charleston, Coles County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that time, the home owner can enjoy 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