RWA Appraisals can help you remove your Private Mortgage Insurance

It's largely understood that a 20% down payment is common when getting a mortgage. Since the risk for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and typical value fluctuationson the chance that a purchaser is unable to pay.

During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender manage the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the value of the property is lower than what the borrower still owes on the loan.

PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and frequently isn't even tax deductible. It's favorable for the lender because they secure the money, and they get the money if the borrower doesn't pay, unlike a piggyback loan where the lender absorbs all the damages.

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

How buyers can refrain from bearing the cost 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 beginning loan amount. Acute homeowners can get off the hook sooner than expected. The law promises that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.

Since it can take many years to reach the point where the principal is only 20% of the initial amount of the loan, it's important to know how your home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Even when nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood might not be following the national trends and/or your home might have gained equity before things settled down.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At RWA Appraisals, we know when property values have risen or declined. We're experts at recognizing value trends in Port Orchard, Pierce County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually drop the PMI with little effort. At which time, the homeowner can retain 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