Have equity in your home? Want a lower payment? An appraisal from REID E. CHOATE & ASSOCIATES, LLC can help you get rid of your PMI.

It's typically inferred that a 20% down payment is common when buying a house. Considering the risk for the lender is often only the remainder between the home value and the amount due on the loan, the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and natural value variations in the event a purchaser doesn't pay.

During the recent mortgage boom that our country recently experienced, it became widespread to see lenders making deals with down payments of 10, 5, 3 or often 0 percent. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI 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 costly to a borrower because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and oftentimes isn't even tax deductible. It's advantageous for the lender because they obtain the money, and they get the money if the borrower doesn't pay, in contrast to a piggyback loan where the lender takes in all the deficits.


Did you have less than 20% to put down on your mortgage? Contact REID E. CHOATE & ASSOCIATES, LLC today at 808-965-0238. You may be able to cancel your Private Mortgage Insurance payment.

How buyers can refrain from bearing the expense of 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 equals 78 percent of the original loan amount on nearly all loans. The law designates that, upon request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, smart homeowners can get off the hook a little earlier.

It can take many years to arrive at the point where the principal is only 80% of the original amount of the loan, so it's necessary to know how your Hawaii home has grown in value. After all, all of the appreciation you've achieved over time counts towards abolishing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood might not follow national trends and/or your home could have secured equity before things simmered down. So even when nationwide trends hint at decreasing home values, you should understand that real estate is local.

The toughest thing for many people to figure out is whether their home equity has exceeded the 20% point. An accredited, Hawaii licensed real estate appraiser can surely help. As appraisers, it's our job to recognize the market dynamics of our area. At REID E. CHOATE & ASSOCIATES, LLC, we know when property values have risen or declined. We're masters at recognizing value trends in Pahoa, Hawaii County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little effort. At that time, the homeowner can enjoy the savings from that point on.


Has your home value appreciated since you first purchased? Contact REID E. CHOATE & ASSOCIATES, LLC today at 808-965-0238. You may be able to cancel your Private Mortgage Insurance premium.

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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