James Earp Appraisal Service can help you remove your Private Mortgage Insurance

It's largely inferred that a 20% down payment is common when purchasing a home. The lender's liability is generally only the difference between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower doesn't pay.

During the recent mortgage upturn of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or often 0 percent. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy protects the lender in case a borrower defaults on the loan and the value 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 monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. Contradictory to a piggyback loan where the lender consumes all the deficits, PMI is beneficial for the lender because they obtain the money, and they get the money if the borrower is unable to pay.

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

How buyers can avoid bearing the cost of PMI

The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law states that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, savvy homeowners can get off the hook a little early.

It can take many years to get to the point where the principal is just 20% of the initial amount of the loan, so it's important to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends indicate decreasing home values, you should realize that real estate is local.

The difficult thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. It's an appraiser's job to keep up with the market dynamics of their area. At James Earp Appraisal Service, we're experts at determining value trends in Raleigh, Wake County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little trouble. At which time, the homeowner 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