Ace Appraisal (970) 731-1986 can help you remove your Private Mortgage Insurance

It's typically known that a 20% down payment is common when buying a house. Considering the risk for the lender is usually only the difference between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and typical value variationson the chance that a purchaser is unable to pay.

The market was accepting down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the market price of the property is less than what the borrower still owes on the loan.

Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's profitable for the lender because they secure the money, and they get paid if the borrower is unable to pay, opposite from a piggyback loan where the lender absorbs all the damages.

How can a homebuyer keep from paying PMI?

With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, wise homeowners can get off the hook ahead of time.

Considering it can take countless years to reach the point where the principal is only 20% of the original amount borrowed, it's crucial to know how your home has grown in value. After all, any appreciation you've acquired over the years counts towards dismissing 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 falling home values, realize that real estate is local. Your neighborhood might not be heeding the national trends and/or your home might have acquired equity before things cooled off.

The toughest thing for almost all 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. It is an appraiser's job to keep up with the market dynamics of their area. At Ace Appraisal (970) 731-1986, we know when property values have risen or declined. We're experts at recognizing value trends in Pagosa Springs, Archuleta County and surrounding areas. Faced with data from an appraiser, the mortgage company will often cancel the PMI with little anxiety. At which time, the homeowner can relish 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