REID E. CHOATE & ASSOCIATES, LLC can help you remove your Private Mortgage Insurance

It's generally understood that a 20% down payment is common when purchasing a home. Considering the liability for the lender is oftentimes only the difference between the home value and the amount outstanding on the loan, the 20% supplies a nice buffer against the charges of foreclosure, reselling the home, and natural value fluctuations on the chance that a borrower doesn't pay.

During the recent mortgage boom of the mid 2000s, it was customary to see lenders reducing down payments to 10, 5 or sometimes 0 percent. A lender is able to manage the added risk of the minimal down payment with Private Mortgage Insurance or PMI. This additional plan protects the lender if a borrower is unable to pay on the loan and the market price of the house is lower 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 lumped into the mortgage payment and oftentimes isn't even tax deductible. Separate from a piggyback loan where the lender absorbs all the damages, PMI is money-making for the lender because they obtain the money, and they receive payment if the borrower is unable to pay.


Has your real estate appreciated since you first purchased? Contact REID E. CHOATE & ASSOCIATES, LLC today at 808-965-0238 to see if you can get rid of your Private Mortgage Insurance premium.

How can a home buyer keep from paying PMI?

As a result of The Homeowners Protection Act of 1998, lenders are obligated to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount on most loans. The law stipulates that, upon request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, acute homeowners can get off the hook a little earlier.

It can take a significant number of years to get to the point where the principal is only 80% of the original loan amount, so it's essential to know how your Hawaii home has appreciated in value. After all, any appreciation you've accomplished over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not adhere to national trends and/or your home might have secured equity before the economy cooled off. So even when nationwide trends indicate falling home values, you should understand that real estate is local.

A certified, Hawaii licensed real estate appraiser can help homeowners figure out just when their home's equity goes over the 20% point, as it's a difficult thing to know. It's an appraiser's job to recognize the market dynamics of their area. At REID E. CHOATE & ASSOCIATES, LLC, we're experts at identifying value trends in Pahoa, Hawaii County, and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often drop the PMI with little anxiety. At which time, the home owner can delight in the savings from that point on.


Is PMI a lineitem in your monthly mortgage payment? Call REID E. CHOATE & ASSOCIATES, LLC today at 808-965-0238 or send us an e-mail. Documentation of your home's present value could save you thousands.

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

 


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