Crescent Appraisal Group, Inc. can help you remove your Private Mortgage Insurance

A 20% down payment is typically accepted when getting a mortgage. Since the risk for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% adds a nice buffer against the costs of foreclosure, selling the home again, and regular value fluctuationson the chance that a borrower defaults.

During the recent mortgage boom of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender manage the additional risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than what is owed on the loan.

PMI can be pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible. Contradictory to a piggyback loan where the lender takes in all the losses, PMI is favorable for the lender because they obtain 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 can home buyers avoid bearing the cost of PMI?

The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law designates that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, savvy home owners can get off the hook a little earlier.

It can take countless years to reach the point where the principal is only 20% of the original amount borrowed, so it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've accomplished over time counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends signify plunging home values, understand that real estate is local. Your neighborhood might not be adopting the national trends and/or your home could have gained equity before things calmed down.

The hardest thing for most home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At Crescent Appraisal Group, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Metairie, Jefferson County and surrounding areas. When faced with figures from an appraiser, the mortgage company will often eliminate 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