profile picture

Have equity in your home? Want a lower payment? An appraisal from Appraisal Express HI, LLC can help you get rid of your PMI.

A 20% down payment is typically accepted when getting a mortgage. Considering the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% supplies a nice buffer against the expenses of foreclosure, reselling the home, and typical value changeson the chance that a purchaser doesn't pay.

During the recent mortgage upturn of the mid 2000s, it became common to see lenders commanding down payments of 10, 5 or often 0 percent. A lender is able to endure the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This supplemental policy protects the lender if a borrower is unable to pay on the loan and the value of the house is lower than the loan balance.

PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the deficits, PMI is profitable 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 buyers refrain from bearing the cost of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Wise home owners can get off the hook beforehand. The law promises that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.

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

The hardest thing for most home owners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At Appraisal Express HI, LLC, we're masters at analyzing value trends in Kihei, Maui 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 generally do away with the PMI with little trouble. 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