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Let Satchell Real Property Services help you figure out if you can eliminate your PMI

When getting a mortgage, 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 sum remaining on the loan, the 20% provides a nice cushion against the charges of foreclosure, reselling the home, and regular value variationson the chance that a borrower defaults.

The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to manage the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. This additional policy guards the lender in case a borrower is unable to pay on the loan and the value of the house is less than what the borrower still owes on the loan.

PMI is pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and oftentimes isn't even tax deductible. Different from a piggyback loan where the lender takes in all the costs, PMI is lucrative for the lender because they collect the money, and they get the money if the borrower defaults.

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

How can home owners prevent paying PMI?

With the employment of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen homeowners can get off the hook a little earlier. The law pledges that, at the request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent.

It can take many years to get to the point where the principal is only 20% of the initial loan amount, so it's necessary to know how your home has appreciated in value. After all, every bit of appreciation you've obtained over time counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends hint at decreasing home values, understand that real estate is local. Your neighborhood may not be minding the national trends and/or your home might have secured equity before things cooled off.

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. It's an appraiser's job to recognize the market dynamics of their area. At Satchell Real Property Services, we're masters at identifying value trends in Webster Groves, Saint Louis County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will most often do away with the PMI with little trouble. 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