Karen A. Zirpoli - KAZ Appraisals, LLC 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 generally only the difference between the home value and the amount outstanding on the loan, the 20% provides a nice buffer against the expenses of foreclosure, selling the home again, and regular value fluctuationson the chance that a borrower is unable to pay.

During the recent mortgage upturn of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to handle the increased risk of the reduced down payment with 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 house is lower than what is owed on the loan.

PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the deficits, PMI is money-making for the lender because they secure the money, and they get paid if the borrower is unable to pay.

How can home buyers avoid paying PMI?

With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, acute home owners can get off the hook sooner than expected.

It can take countless years to arrive at the point where the principal is just 20% of the initial loan amount, so it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've gained over the years counts towards dismissing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home might have acquired equity before things settled down, so even when nationwide trends forecast plummeting home values, you should understand that real estate is local.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Karen A. Zirpoli - KAZ Appraisals, LLC, we know when property values have risen or declined. We're experts at pinpointing value trends in Nokesville, Prince William County and surrounding areas. Faced with figures from an appraiser, the mortgage company will most often drop the PMI with little effort. At which time, the homeowner can enjoy 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