Let Nordquist Appraisal LLC help you figure out if you can get rid of your PMI

When getting a mortgage, a 20% down payment is usually the standard. The lender's liability is often only the remainder between the home value and the amount due on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value changes in the event a purchaser doesn't pay.

The market was taking down payments down to 10, 5 and even 0 percent during the mortgage boom of the last decade. How does a lender manage the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This additional plan guards the lender if a borrower is unable to pay on the loan and the worth of the property is less than what is owed on the loan.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and often isn't even tax deductible, PMI can be expensive to a borrower. Contradictory to a piggyback loan where the lender consumes all the costs, PMI is money-making for the lender because they collect the money, and they get the money if the borrower is unable to pay.

How home owners can prevent bearing the expense of PMI

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Acute home owners can get off the hook a little earlier. The law states that, at the request of the homeowner, the PMI must be released when the principal amount equals only 80 percent.

Considering it can take countless years to get to the point where the principal is just 20% of the initial amount of the loan, it's necessary to know how your home has increased in value. After all, any appreciation you've obtained over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% threshold? Your neighborhood might not be adhering to the national trends and/or your home might have acquired equity before things cooled off, so even when nationwide trends signify falling home values, you should realize that real estate is local.

The toughest thing for almost all homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can certainly help. It is an appraiser's job to know the market dynamics of their area. At Nordquist Appraisal LLC, we're experts at determining value trends in Pittsburgh, Allegheny County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will generally do away with 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