Nordquist Appraisal LLC can help you remove your Private Mortgage Insurance

It's widely known that a 20% down payment is accepted when getting a mortgage. The lender's liability is oftentimes only the difference between the home value and the sum due on the loan, so the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and regular value fluctuations on the chance that a borrower doesn't pay.

The market was 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 manage the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy protects the lender if a borrower is unable to pay on the loan and the value of the property is lower than the loan balance.

PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and oftentimes isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the damages, PMI is lucrative for the lender because they collect the money, and they get paid if the borrower is unable to pay.

How can home owners prevent paying PMI?

With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. The law designates that, at the request of the home owner, the PMI must be abandoned when the principal amount equals only 80 percent. So, keen homeowners can get off the hook a little earlier.

It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's necessary to know how your home has grown in value. After all, any appreciation you've accomplished over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends forecast declining home values, you should realize that real estate is local.

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. As appraisers, it's our job to know the market dynamics of our area. At Nordquist Appraisal LLC, we know when property values have risen or declined. We're masters at pinpointing value trends in Pittsburgh, Allegheny County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally do away with the PMI with little anxiety. At that time, the home owner 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