C.D. McCullough Real Estate Appraisal can help you remove your Private Mortgage Insurance

It's largely known that a 20% down payment is accepted when buying a house. Considering the liability for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and regular value variationsin the event a borrower is unable to pay.

Lenders were accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy covers the lender in case a borrower defaults on the loan and the value of the property is less than what is owed on the loan.

PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and often isn't even tax deductible. It's profitable for the lender because they obtain the money, and they get paid if the borrower defaults, different from a piggyback loan where the lender absorbs all the losses.

How homeowners can refrain from paying PMI

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are obligated to automatically eliminate the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy home owners can get off the hook ahead of time.

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

The hardest thing for most homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to recognize the market dynamics of their area. At C.D. McCullough Real Estate Appraisal, we know when property values have risen or declined. We're experts at determining value trends in Colton, San Bernardino County and surrounding areas. When faced with data from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At which 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