Let All City Appraisal help you decide if you can cancel your PMI

It's widely understood that a 20% down payment is accepted when buying a house. The lender's risk is usually only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and typical value variations in the event a borrower is unable to pay.

Lenders were accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. A lender is able to endure the added risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower defaults on the loan and the value of the property is less than what is owed on the loan.

Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible, PMI is costly to a borrower. Opposite from a piggyback loan where the lender absorbs all the costs, PMI is profitable for the lender because they secure the money, and they receive payment 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 home buyers can refrain from bearing the expense of PMI

With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, savvy homeowners can get off the hook a little early.

Because it can take countless years to arrive at the point where the principal is only 20% of the initial amount borrowed, it's essential 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 why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends predict decreasing home values, realize that real estate is local. Your neighborhood may not be heeding the national trends and/or your home could have acquired equity before things calmed down.

An accredited, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a difficult thing to know. It is an appraiser's job to understand the market dynamics of their area. At All City Appraisal, we know when property values have risen or declined. We're masters at pinpointing value trends in Woodland Hills, Los Angeles County and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little effort. At which 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