Let Daniel Todd Appraisal Services, LLC help you decide if you can cancel your PMI

A 20% down payment is typically the standard when buying a house. The lender's liability is usually only the remainder between the home value and the sum due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value variations in the event a purchaser defaults.

During the recent mortgage boom of the last decade, it became widespread to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional plan protects the lender if a borrower doesn't pay on the loan and the worth of the home 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 lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. It's beneficial for the lender because they obtain the money, and they get the money if the borrower doesn't pay, contradictory to a piggyback loan where the lender consumes all the deficits.

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

How can a homeowner avoid bearing the cost of PMI?

With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy homeowners can get off the hook sooner than expected. The law pledges that, upon request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent.

It can take many years to arrive at the point where the principal is only 20% of the original amount of the loan, so it's necessary to know how your home has appreciated in value. After all, any appreciation you've obtained over the years counts towards abolishing PMI. So why pay it after your loan balance has dropped below the 80% mark? Despite the fact that nationwide trends forecast plunging home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home may have gained equity before things cooled off.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It's an appraiser's job to know the market dynamics of their area. At Daniel Todd Appraisal Services, LLC, we're experts at determining value trends in Bloomington, Monroe County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will often cancel the PMI with little trouble. 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