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

It's generally understood that a 20% down payment is common when purchasing a home. The lender's liability is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice cushion against the charges of foreclosure, selling the home again, and natural value variations in the event a borrower doesn't pay.

The market was working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the additional risk of the minimal down payment with Private Mortgage Insurance or PMI. This supplemental plan covers the lender in the event a borrower defaults on the loan and the value of the house is less than what is owed on the loan.

PMI can be costly to a borrower in that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the losses, PMI is lucrative for the lender because they acquire the money, and they receive payment 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 a home buyer refrain from bearing the cost of PMI?

The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, acute home owners can get off the hook a little early.

Since it can take many years to reach the point where the principal is just 20% of the initial loan amount, it's necessary to know how your home has appreciated in value. After all, any appreciation you've accomplished over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends hint at plunging home values, understand that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home might have gained equity before things calmed down.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Premier Appraisal of SoCal, we know when property values have risen or declined. We're experts at pinpointing value trends in Mission Viejo, Orange County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually cancel the PMI with little trouble. At which time, the homeowner 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