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P.M. Appraisals, Inc. can help you remove your Private Mortgage Insurance

A 20% down payment is usually accepted when buying a house. Because the liability for the lender is often only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and regular value changeson the chance that a borrower doesn't pay.

During the recent mortgage upturn of the mid 2000s, it was common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender if a borrower doesn't pay on the loan and the market price of the house is less than the loan balance.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Different from a piggyback loan where the lender consumes all the deficits, PMI is advantageous for the lender because they secure the money, and they receive payment if the borrower doesn't pay.

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 bearing the cost of PMI

With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Wise homeowners can get off the hook a little early. The law designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.

Considering it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's essential to know how your home has appreciated in value. After all, all of the appreciation you've acquired over the years counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be adhering to the national trends and/or your home may have acquired equity before things cooled off, so even when nationwide trends predict plunging home values, you should understand that real estate is local.

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 is an appraiser's job to understand the market dynamics of their area. At P.M. Appraisals, Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in Babylon, Suffolk County and surrounding areas. When faced with information from an appraiser, the mortgage company will often remove the PMI with little anxiety. At that time, the homeowner 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