R.M. Conrad & Associates, Inc. can help you remove your Private Mortgage Insurance

A 20% down payment is typically accepted when getting a mortgage. The lender's liability is usually only the remainder between the home value and the amount outstanding on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and regular value variations on the chance that a borrower defaults.

The market was accepting down payments as low as 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower is unable to pay on the loan and the worth of the home is lower than the balance of the loan.

PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible. Opposite from a piggyback loan where the lender consumes all the damages, PMI is lucrative for the lender because they secure the money, and they get the money 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 homebuyer avoid bearing the cost of PMI?

The Homeowners Protection Act of 1998 makes 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 designates that, at the request of the home owner, the PMI must be dropped when the principal amount equals just 80 percent. So, smart home owners can get off the hook a little earlier.

Since it can take many years to reach 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, every bit of appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends predict plunging home values, understand that real estate is local. Your neighborhood might not be following the national trends and/or your home might have acquired equity before things cooled off.

The hardest thing for most homeowners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. It is an appraiser's job to know the market dynamics of their area. At R.M. Conrad & Associates, Inc., we're experts at analyzing value trends in West Chester, Chester County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will most often eliminate the PMI with little trouble. At which time, the homeowner 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