Nordquist Appraisal LLC can help you remove your Private Mortgage Insurance

A 20% down payment is typically the standard when buying a house. The lender's liability is generally only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value fluctuations on the chance that a purchaser defaults.

During the recent mortgage boom of the last decade, it was widespread to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower is unable to pay on the loan and the value of the home is less than what is owed on the loan.

PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and generally isn't even tax deductible. It's beneficial for the lender because they secure the money, and they get paid if the borrower is unable to pay, contradictory to a piggyback loan where the lender consumes all the damages.

How home owners can refrain from bearing the expense of PMI

The Homeowners Protection Act of 1998 obligates the lenders on most loans to automatically stop the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Acute home owners can get off the hook a little early. The law guarantees that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.

Because it can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, it's crucial to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends hint at plummeting home values, realize that real estate is local. Your neighborhood might not be minding the national trends and/or your home might have gained equity before things simmered down.

An accredited, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. It's an appraiser's job to know the market dynamics of their area. At Nordquist Appraisal LLC, we're masters at recognizing value trends in Pittsburgh, Allegheny County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally eliminate the PMI with little trouble. At which time, the homeowner can relish 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