Tierney Appraisals can help you remove your Private Mortgage Insurance

When getting a mortgage, a 20% down payment is usually the standard. Since the risk for the lender is oftentimes only the difference between the home value and the sum due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and regular value changesin the event a borrower is unable to pay.

During the recent mortgage upturn of the mid 2000s, it was widespread to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender endure the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan protects the lender in the event a borrower is unable to pay on the loan and the market price of the property is less than the balance of the loan.

Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. It's advantageous for the lender because they acquire the money, and they get the money if the borrower is unable to pay, opposite from a piggyback loan where the lender absorbs all the deficits.

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

How can a homebuyer avoid paying PMI?

With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Smart home owners can get off the hook a little early. The law promises that, at the request of the homeowner, the PMI must be released when the principal amount equals just 80 percent.

Since it can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends indicate decreasing home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home could have acquired equity before things calmed down.

The toughest thing for most homeowners to know is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to keep up with the market dynamics of our area. At Tierney Appraisals, we're experts at recognizing value trends in Beverly, Essex County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually remove the PMI with little anxiety. At which time, the homeowner 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