profile picture

English Spanish

Barnes Appraisal Company can help you remove your Private Mortgage Insurance

A 20% down payment is typically the standard when buying a house. Considering the liability for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, selling the home again, and natural value variationson the chance that a borrower doesn't pay.

During the recent mortgage boom of the last decade, it became common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender endure the added risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional policy protects the lender in case a borrower is unable to pay on the loan and the worth of the house is lower than the balance of the loan.

PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and oftentimes isn't even tax deductible. It's beneficial for the lender because they acquire the money, and they get paid if the borrower doesn't pay, contradictory to a piggyback loan where the lender absorbs all the losses.

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

How home buyers can prevent bearing the expense of PMI

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop 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 guarantees that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.

It can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, so it's essential to know how your home has increased in value. After all, all of the appreciation you've gained over time counts towards abolishing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home may have secured equity before things calmed down, so even when nationwide trends signify decreasing home values, you should understand that real estate is local.

The toughest thing for most homeowners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It's an appraiser's job to understand the market dynamics of their area. At Barnes Appraisal Company, we know when property values have risen or declined. We're experts at pinpointing value trends in Lawton, Comanche County and surrounding areas. When faced with information from an appraiser, the mortgage company will generally drop the PMI with little trouble. At which time, the homeowner 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