Let help you decide if you can eliminate your PMI

When purchasing a home, a 20% down payment is typically the standard. Considering the risk for the lender is oftentimes only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and typical value changesin the event a borrower doesn't pay.

During the recent mortgage boom of the last decade, it was customary to see lenders commanding down payments of 10, 5 or even 0 percent. A lender is able to manage the added risk of the small down payment with Private Mortgage Insurance or PMI. This added plan protects the lender if a borrower defaults on the loan and the value of the home is less than the balance of the loan.

Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and oftentimes isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender absorbs all the deficits, PMI is favorable for the lender because they secure 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?

With the implementation of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan equals 78 percent of the initial loan amount. Keen homeowners can get off the hook a little early. The law guarantees that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches only 80 percent.

Since it can take countless years to get to the point where the principal is only 20% of the initial loan amount, it's crucial to know how your home has increased in value. After all, any appreciation you've obtained over time counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home might have acquired equity before things calmed down, so even when nationwide trends predict plummeting home values, you should realize that real estate is local.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a hard thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At , we're masters at pinpointing value trends in , Baltimore County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will generally cancel the PMI with little trouble. At that time, the home owner 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