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

It's typically known that a 20% down payment is accepted when buying a house. Considering the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value variationson the chance that a borrower defaults.

Lenders were taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the worth of the property is less than what is owed on the loan.

PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender takes in all the damages, PMI is beneficial for the lender because they secure the money, and they get paid 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 homeowners can avoid paying PMI

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. Savvy homeowners can get off the hook a little earlier. The law stipulates that, upon request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.

It can take many years to reach the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has grown in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home might have gained equity before things settled down, so even when nationwide trends forecast plunging home values, you should understand that real estate is local.

The difficult thing for many home owners to understand is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. It's an appraiser's job to keep up with the market dynamics of their area. At Crescent Appraisal Group, Inc., we know when property values have risen or declined. We're masters at pinpointing value trends in Metairie, Jefferson County and surrounding areas. When faced with information from an appraiser, the mortgage company will most often cancel the PMI with little anxiety. At which time, the home owner 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