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Have equity in your home? Want a lower payment? An appraisal from P.M. Appraisals, Inc. can help you get rid of your PMI.

When buying a house, a 20% down payment is typically the standard. The lender's risk is usually only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value variations in the event a borrower doesn't pay.

The market was working with down payments down to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender handle the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This supplemental policy takes care of the lender if a borrower doesn't pay on the loan and the market price of the house is lower than what is owed on the loan.

Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender takes in all the costs, PMI is lucrative for the lender because they collect the money, and they get the money if the borrower is unable to pay.

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

How can a home buyer refrain from bearing the cost of PMI?

The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent. So, smart home owners can get off the hook a little early.

Because it can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has increased in value. After all, all of the appreciation you've obtained over time counts towards removing PMI. So why pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends predict decreasing home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home may have secured equity before things calmed down.

The toughest thing for many homeowners to know is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to understand the market dynamics of our area. At P.M. Appraisals, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Babylon, Suffolk County and surrounding areas. When faced with data from an appraiser, the mortgage company will often cancel the PMI with little effort. At that time, the home owner can enjoy 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