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Space Coast Appraisal can help you remove your Private Mortgage Insurance

A 20% down payment is typically accepted when purchasing a home. Since the risk for the lender is oftentimes only the remainder between the home value and the sum outstanding on the loan, the 20% supplies a nice buffer against the charges of foreclosure, selling the home again, and natural value fluctuationsin the event a purchaser doesn't pay.

During the recent mortgage upturn of the last decade, it was common to see lenders commanding down payments of 10, 5 or sometimes 0 percent. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan protects the lender in case a borrower defaults on the loan and the value of the house is less than the balance of the loan.

PMI can be expensive to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and frequently isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the losses, PMI is beneficial for the lender because they obtain the money, and they get paid 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 buyers can avoid bearing the expense of PMI

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law promises that, at the request of the home owner, the PMI must be released when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook a little earlier.

Because it can take countless years to reach the point where the principal is just 20% of the original amount of the loan, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've achieved over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be reflecting the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends hint at declining home values, you should realize that real estate is local.

The difficult thing for almost all home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At Space Coast Appraisal, we know when property values have risen or declined. We're experts at identifying value trends in Indian Harbour Beach, Brevard County and surrounding areas. Faced with figures from an appraiser, the mortgage company will generally remove the PMI with little trouble. At that time, the homeowner can delight in 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