Let Giles Appraisal Group, Inc. help you determine if you can cancel your PMI

It's largely known that a 20% down payment is the standard when purchasing a home. Since the liability for the lender is usually only the difference between the home value and the sum due on the loan, the 20% adds a nice cushion against the costs of foreclosure, reselling the home, and typical value variationson the chance that a purchaser is unable to pay.

Lenders were accepting down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. This added policy takes care of the lender in the event a borrower defaults on the loan and the value of the house is less than what is owed on the loan.

PMI can be expensive to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and frequently isn't even tax deductible. It's beneficial for the lender because they collect the money, and they get paid if the borrower is unable to pay, opposite from a piggyback loan where the lender takes in all the costs.

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

How homeowners can keep from bearing the cost of PMI

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

It can take many years to get to the point where the principal is just 20% of the initial amount of the loan, so it's crucial to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends signify decreasing home values, understand that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things calmed down.

The difficult thing for most homeowners to understand is just when their home's equity goes over the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Giles Appraisal Group, Inc., we're masters at determining value trends in Panama City, Bay County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At which time, the homeowner can relish 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