Let Peterson Appraisal Group help you figure out if you can eliminate your PMI

A 20% down payment is typically the standard when getting a mortgage. The lender's risk is oftentimes only the remainder between the home value and the sum remaining on the loan, so the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and natural value variations on the chance that a borrower doesn't pay.

The market was accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the added risk of the small down payment with Private Mortgage Insurance or PMI. This supplemental policy guards the lender in case a borrower is unable to pay on the loan and the value of the home is lower than the balance of the loan.

Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible, PMI is costly to a borrower. It's lucrative for the lender because they acquire the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender consumes all the deficits.

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 keep from bearing the expense of PMI?

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise homeowners can get off the hook a little early. The law pledges that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.

It can take many years to get to the point where the principal is only 20% of the initial loan amount, so it's necessary to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends signify plummeting home values, be aware that real estate is local. Your neighborhood may not be adhering to the national trends and/or your home could have gained equity before things calmed 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's an appraiser's job to recognize the market dynamics of their area. At Peterson Appraisal Group, we're masters at analyzing value trends in Rocklin, Placer County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will most often remove the PMI with little effort. At that time, the home owner can retain 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