Let Crescent Appraisal Group, Inc. help you learn if you can get rid of your PMI

When purchasing a home, a 20% down payment is usually the standard. Since the risk for the lender is generally only the difference between the home value and the sum outstanding on the loan, the 20% provides a nice cushion against the expenses of foreclosure, selling the home again, and regular value changesin the event a borrower defaults.

Banks were taking down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower is unable to pay on the loan and the worth of the home is less than what the borrower still owes on the loan.

Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they obtain the money, and they get paid 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 buyers can refrain from bearing the expense of PMI

With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Keen home owners can get off the hook beforehand. The law pledges that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent.

It can take countless years to arrive at the point where the principal is only 20% of the original loan amount, so it's important to know how your home has increased in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not be heeding the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends indicate decreasing home values, you should realize that real estate is local.

The hardest thing for many homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. As appraisers, it's our job to recognize the market dynamics of our area. At Crescent Appraisal Group, Inc., we're masters at identifying value trends in Metairie, Jefferson County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often do away with the PMI with little anxiety. 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