Let South Shore Appraisals help you determine if you can cancel your PMI

A 20% down payment is typically the standard when buying a house. The lender's risk is usually only the remainder between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value fluctuations in the event a borrower doesn't pay.

During the recent mortgage upturn of the last decade, it was customary to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender handle the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender in case a borrower defaults on the loan and the value of the house is lower than the loan balance.

PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and frequently isn't even tax deductible. It's beneficial for the lender because they secure the money, and they get paid if the borrower defaults, separate from a piggyback loan where the lender consumes all the damages.

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

How can a buyer keep from bearing the cost of PMI?

The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Keen homeowners can get off the hook ahead of time. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.

Because it can take countless years to arrive at the point where the principal is just 20% of the original amount borrowed, it's crucial to know how your home has grown 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 dropped below the 80% mark? Even when nationwide trends indicate decreasing home values, realize that real estate is local. Your neighborhood might not be adopting the national trends and/or your home may have acquired equity before things simmered down.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to understand the market dynamics of their area. At South Shore Appraisals, we know when property values have risen or declined. We're masters at identifying value trends in Schererville, Lake County and surrounding areas. Faced with information from an appraiser, the mortgage company will often drop the PMI with little anxiety. 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