Let help you learn if you can eliminate your PMI

When purchasing a home, a 20% down payment is typically the standard. Since the risk for the lender is usually only the remainder between the home value and the amount due on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value changesin the event a purchaser is unable to pay.

During the recent mortgage upturn of the mid 2000s, it became common to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to manage the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplementary plan protects the lender in case a borrower defaults on the loan and the value of the home is less than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible, PMI is costly to a borrower. It's beneficial for the lender because they secure the money, and they get paid if the borrower is unable to pay, opposite from a piggyback loan where the lender absorbs all the deficits.

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

How can home buyers prevent bearing the cost of PMI?

With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. The law pledges that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook ahead of time.

Considering it can take countless years to get to the point where the principal is just 20% of the original amount of the loan, it's important to know how your home has grown in value. After all, every bit of appreciation you've obtained over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood may not be minding the national trends and/or your home might have gained equity before things cooled off, so even when nationwide trends signify decreasing home values, you should realize that real estate is local.

The difficult thing for almost all homeowners to understand is just when their home's equity goes over the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to know the market dynamics of our area. At , we know when property values have risen or declined. We're experts at analyzing value trends in , Baltimore County and surrounding areas. Faced with data from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that 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