Verschelden Appraisals can help you remove your Private Mortgage Insurance

A 20% down payment is typically the standard when buying a house. Because the risk for the lender is usually only the difference between the home value and the amount due on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and natural value changesin the event a purchaser defaults.

The market was taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added plan takes care of the lender if a borrower defaults on the loan and the value of the home is lower than what is owed on the loan.

PMI can be costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and generally isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they collect 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 can homebuyers keep from paying PMI?

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically stop the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount reaches just 80 percent. So, wise homeowners can get off the hook a little early.

Because it can take many years to get to the point where the principal is only 20% of the initial amount of the loan, it's necessary to know how your home has grown in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be adopting the national trends and/or your home might have acquired equity before things simmered down, so even when nationwide trends forecast declining home values, you should understand that real estate is local.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At Verschelden Appraisals, we're masters at determining value trends in Modesto, Stanislaus County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally eliminate 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