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Zacour & Associates, Inc. can help you remove your Private Mortgage Insurance

It's largely understood that a 20% down payment is common when buying a house. Since the risk for the lender is usually only the difference between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value variationson the chance that a purchaser doesn't pay.

During the recent mortgage upturn of the mid 2000s, 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 solution is Private Mortgage Insurance or PMI. PMI protects the lender in case a borrower defaults on the loan and the value of the property is less than the loan balance.

Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage monthly payment and oftentimes isn't even tax deductible, PMI is pricey to a borrower. It's money-making for the lender because they obtain the money, and they get the money if the borrower defaults, opposite from a piggyback loan where the lender takes in all the losses.

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

How can a buyer refrain from paying PMI?

The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically cancel the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Acute homeowners can get off the hook beforehand. The law guarantees that, upon request of the home owner, the PMI must be abandoned when the principal amount reaches only 80 percent.

It can take many years to get to the point where the principal is just 20% of the initial loan amount, so it's important to know how your home has increased in value. After all, all of the appreciation you've acquired over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Your neighborhood may not be reflecting the national trends and/or your home might have secured equity before things settled down, so even when nationwide trends forecast falling home values, you should understand that real estate is local.

The hardest thing for almost all home owners to understand is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can definitely help. It's an appraiser's job to recognize the market dynamics of their area. At Zacour & Associates, Inc., we're experts at identifying value trends in El Paso, El Paso County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually cancel the PMI with little trouble. At which time, the home owner 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