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

It's widely inferred that a 20% down payment is common when buying a house. Since the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value changesin the event a purchaser is unable to pay.

The market was taking down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the additional risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary policy protects the lender in case a borrower is unable to pay on the loan and the value of the home is lower than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI is pricey to a borrower. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is favorable for the lender because they acquire the money, and they get the money if the borrower defaults.

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

How home owners can prevent paying PMI

With the employment of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Wise home owners can get off the hook a little earlier. The law pledges that, at the request of the home owner, the PMI must be abandoned when the principal amount reaches just 80 percent.

Because it can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, it's essential to know how your home has grown in value. After all, all of the appreciation you've accomplished over time counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home may have acquired equity before things settled down, so even when nationwide trends signify plummeting home values, you should understand that real estate is local.

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 hard thing to know. It is an appraiser's job to know the market dynamics of their area. At Peterson Appraisal Group, we're experts at recognizing value trends in Rocklin, Placer County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often remove the PMI with little trouble. At which time, the home owner 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