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Let Cheaney Appraisal Service help you learn if you can cancel your PMI

When purchasing a home, a 20% down payment is usually the standard. Since the liability for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice cushion against the costs of foreclosure, selling the home again, and regular value changesin the event a purchaser doesn't pay.

During the recent mortgage upturn of the last decade, it was widespread to see lenders taking down payments of 10, 5 or even 0 percent. How does a lender manage the additional risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower doesn't pay on the loan and the worth of the house is lower than what the borrower still owes on the loan.

PMI can be pricey to a borrower on the grounds that 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 money-making for the lender because they collect the money, and they receive payment if the borrower is unable to pay, separate from a piggyback loan where the lender consumes all the deficits.

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

How homeowners can avoid bearing the expense of PMI

With the utilization of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the original loan amount. The law promises that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, wise homeowners can get off the hook a little early.

It can take countless years to reach the point where the principal is only 20% of the initial amount borrowed, so it's crucial to know how your home has grown in value. After all, all of the appreciation you've accomplished over time counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Despite the fact that nationwide trends hint at plunging home values, be aware that real estate is local. Your neighborhood might not be reflecting the national trends and/or your home may have gained equity before things calmed down.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to know the market dynamics of their area. At Cheaney Appraisal Service, we know when property values have risen or declined. We're masters at analyzing value trends in Evansville, Vanderburgh County and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often remove the PMI with little anxiety. At that 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