Capraro Appraisal Company, Inc. can help you remove your Private Mortgage Insurance

When getting a mortgage, a 20% down payment is typically the standard. Since the liability for the lender is often only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice cushion against the costs of foreclosure, reselling the home, and natural value changesin the event a borrower doesn't pay.

During the recent mortgage boom of the mid 2000s, it became common to see lenders taking down payments of 10, 5 or often 0 percent. How does a lender handle the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplementary policy protects the lender if a borrower doesn't pay on the loan and the value of the home is lower than what the borrower still owes on the loan.

PMI is pricey to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and generally isn't even tax deductible. It's profitable for the lender because they secure the money, and they get paid if the borrower defaults, unlike a piggyback loan where the lender absorbs 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 home owners keep from bearing the cost of PMI?

The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the primary loan amount. Acute homeowners can get off the hook a little earlier. The law guarantees that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals only 80 percent.

Because it can take countless years to reach the point where the principal is only 20% of the original amount borrowed, it's crucial to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Despite the fact that nationwide trends indicate decreasing home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home might have gained equity before things calmed down.

The difficult thing for almost all home owners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. As appraisers, it's our job to recognize the market dynamics of our area. At Capraro Appraisal Company, Inc., we're experts at determining value trends in North Providence, Providence County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will usually remove the PMI with little effort. At which 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