profile picture

English French Spanish

Let Russell Appraisal Service help you discover if you can cancel your PMI

A 20% down payment is usually accepted when purchasing a home. The lender's liability is generally only the difference between the home value and the amount due on the loan, so the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value fluctuations in the event a borrower defaults.

During the recent mortgage boom of the mid 2000s, it was customary to see lenders requiring down payments of 10, 5 or even 0 percent. A lender is able to endure the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the worth of the property is less than what is owed on the loan.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI is pricey to a borrower. It's beneficial for the lender because they obtain the money, and they get paid if the borrower doesn't pay, contradictory to a piggyback loan where the lender takes in all the damages.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How can home owners avoid bearing the cost of PMI?

The Homeowners Protection Act of 1998 obligates the lenders on nearly all loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Smart home owners can get off the hook sooner than expected. The law stipulates that, upon request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent.

Since it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's important to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends predict plunging home values, be aware that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have acquired equity before things calmed down.

The difficult thing for almost all home owners to understand 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 know the market dynamics of their area. At Russell Appraisal Service, we know when property values have risen or declined. We're experts at identifying value trends in Pflugerville, Travis County and surrounding areas. Faced with data from an appraiser, the mortgage company will most often do away with the PMI with little anxiety. At which time, the home owner can enjoy 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

Paying PMI?

Would you like to save money by not having to pay for Private Mortgage Insurance? We can help. Simply fill out the form below as completely as possible and we'll send you information on how to save PMI expenses, with no obligation to you. We guarantee your privacy.

Information
Question