Let Verschelden Appraisals help you determine if you can get rid of your PMI

When getting a mortgage, a 20% down payment is usually the standard. Since the risk for the lender is usually only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value changeson the chance that a purchaser defaults.

Lenders were working with down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in case a borrower doesn't pay on the loan and the market price of the house is lower than the loan balance.

Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's profitable for the lender because they obtain the money, and they get paid if the borrower is unable to pay, unlike a piggyback loan where the lender takes in all the costs.

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

How can a home owner prevent bearing the cost of PMI?

The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook ahead of time. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount equals just 80 percent.

Because it can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've achieved over the years counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends signify falling home values, understand that real estate is local. Your neighborhood might not be adhering to the national trends and/or your home might have acquired equity before things simmered down.

An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At Verschelden Appraisals, we're masters at recognizing value trends in Modesto, Stanislaus County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often drop the PMI with little effort. At that time, the home owner 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