Tierney Appraisals can help you remove your Private Mortgage Insurance

When getting a mortgage, a 20% down payment is typically the standard. The lender's liability is generally only the difference between the home value and the sum remaining on the loan, so the 20% supplies a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser is unable to pay.

During the recent mortgage upturn of the mid 2000s, it was common to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added policy guards the lender in case a borrower doesn't pay on the loan and the market price of the home is lower than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible, PMI can be pricey to a borrower. Different from a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they obtain the money, and they get the money if the borrower doesn't pay.

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

How homebuyers can refrain from paying PMI

With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Savvy home owners can get off the hook ahead of time. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent.

Since it can take countless years to arrive at the point where the principal is only 20% of the original amount of the loan, it's important to know how your home has increased in value. After all, any appreciation you've gained over the years counts towards abolishing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Despite the fact that nationwide trends hint at falling home values, realize that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home could have acquired equity before things calmed down.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Tierney Appraisals, we're masters at identifying value trends in Beverly, Essex County and surrounding areas, and we know when property values have risen or declined. When faced with information from an appraiser, the mortgage company will generally 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