Tortorella Appraisals, Inc. can help you remove your Private Mortgage Insurance

It's widely known that a 20% down payment is the standard when getting a mortgage. Considering the risk for the lender is usually only the remainder between the home value and the amount remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, reselling the home, and regular value variationsin the event a purchaser is unable to pay.

During the recent mortgage boom of the mid 2000s, it became widespread to see lenders taking down payments of 10, 5 or sometimes 0 percent. How does a lender handle the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This additional plan covers the lender if a borrower defaults on the loan and the value of the home is less than what is owed on the loan.

Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. Contradictory to a piggyback loan where the lender consumes all the damages, PMI is beneficial for the lender because they acquire the money, and they get the money 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 can a homeowner keep from bearing the cost of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, savvy home owners can get off the hook ahead of time.

Considering it can take many years to arrive at the point where the principal is only 20% of the original loan amount, it's crucial to know how your home has appreciated in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood may not be minding the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends hint at declining home values, you should realize that real estate is local.

The difficult thing for most homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can certainly help. It's an appraiser's job to recognize the market dynamics of their area. At Tortorella Appraisals, Inc., we're experts at recognizing value trends in Kingston, Saratoga 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 cancel the PMI with little effort. At that time, the home owner 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