Let Lynch Appraisals help you determine if you can eliminate your PMI

A 20% down payment is typically accepted when purchasing a home. Considering the liability for the lender is usually only the remainder between the home value and the sum due on the loan, the 20% provides a nice buffer against the costs of foreclosure, reselling the home, and natural value fluctuationsin the event a purchaser is unable to pay.

During the recent mortgage boom of the mid 2000s, it was widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to endure the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional policy takes care of the lender in case a borrower is unable to pay on the loan and the market price of the property is less than what is owed on the loan.

PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and many times isn't even tax deductible. Different from a piggyback loan where the lender takes in all the losses, PMI is favorable for the lender because they obtain the money, and they receive payment 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 can a homeowner refrain from bearing the cost of PMI?

With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Keen homeowners can get off the hook beforehand. The law designates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.

Because it can take many years to arrive at the point where the principal is just 20% of the initial loan amount, it's crucial to know how your home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be adopting the national trends and/or your home could have secured equity before things simmered down, so even when nationwide trends signify falling home values, you should understand that real estate is local.

The hardest thing for many homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Lynch Appraisals, we're masters at recognizing value trends in Estill Springs, Franklin 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 often drop the PMI with little trouble. At that time, the home owner 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