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Let Zacour & Associates, Inc. help you learn if you can get rid of your PMI

It's widely known that a 20% down payment is accepted when getting a mortgage. Considering the liability for the lender is often only the remainder between the home value and the amount outstanding on the loan, the 20% adds a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuationson the chance that a borrower is unable to pay.

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

Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible, PMI can be costly to a borrower. Different from a piggyback loan where the lender takes in all the deficits, PMI is money-making for the lender because they collect the money, and they receive payment if the borrower is unable to pay.

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

How can a home owner refrain from paying PMI?

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, keen homeowners can get off the hook a little earlier.

It can take countless years to arrive at the point where the principal is just 20% of the original amount of the loan, so it's crucial to know how your home has appreciated in value. After all, any appreciation you've gained over the years counts towards removing PMI. So why pay it after your loan balance has dropped below the 80% threshold? Even when nationwide trends indicate plummeting home values, realize that real estate is local. Your neighborhood may not be reflecting the national trends and/or your home may have secured equity before things settled down.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. As appraisers, it's our job to keep up with the market dynamics of our area. At Zacour & Associates, Inc., we're experts at analyzing value trends in El Paso, El Paso County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually cancel the PMI with little anxiety. At that time, the homeowner can relish 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