Let MarketFocusValuations help you discover if you can cancel your PMI

It's typically understood that a 20% down payment is the standard when getting a mortgage. Since the risk for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value fluctuationsin the event a purchaser defaults.

The market was accepting down payments down to 10, 5 and often 0 percent during the mortgage boom of the last decade. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added plan protects the lender in case a borrower is unable to pay on the loan and the market price of the property is lower than the balance of the loan.

PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender consumes all the losses, PMI is favorable for the lender because they acquire the money, and they receive payment 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 homeowners keep from paying PMI?

With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Smart homeowners can get off the hook a little earlier. The law promises that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.

It can take countless years to get to the point where the principal is just 20% of the original loan amount, so it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home may have secured equity before things cooled off, so even when nationwide trends signify declining home values, you should understand that real estate is local.

The toughest thing for many homeowners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. As appraisers, it's our job to keep up with the market dynamics of our area. At MarketFocusValuations, we know when property values have risen or declined. We're experts at determining value trends in San Diego, San Diego County and surrounding areas. When faced with information from an appraiser, the mortgage company will often do away with the PMI with little effort. At that time, the home owner 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