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

It's typically understood that a 20% down payment is accepted 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% supplies a nice cushion against the charges of foreclosure, reselling the home, and typical value changes in the event a purchaser defaults.

The market was taking down payments discounted to 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the value of the home is lower than what is owed on the loan.

PMI is costly to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and often isn't even tax deductible. Different from a piggyback loan where the lender takes in all the losses, PMI is money-making for the lender because they secure the money, and they are covered if the borrower defaults.


The savings from getting rid of your PMI pays for the appraisal in no time. REID E. CHOATE & ASSOCIATES, LLC has years of experience with value trends in the city of Pahoa and Hawaii County. Contact us today.

How can homeowners avoid bearing the expense of PMI?

As a result of The Homeowners Protection Act of 1998, lenders are required to automatically cease the PMI when the principal balance of the loan equals 78 percent of the original loan amount on most loans. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent. So, savvy homeowners can get off the hook a little earlier.

It can take many years to reach the point where the principal is just 80% of the initial amount of the loan, so it's essential to know how your Hawaii home has grown in value. After all, every bit of appreciation you've acquired over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends forecast declining home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home may have acquired equity before things simmered down.

A certified, Hawaii licensed real estate appraiser can help homeowners figure out if their equity has reached the 20% point, as it's a difficult thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At REID E. CHOATE & ASSOCIATES, LLC, we know when property values have risen or declined. We're experts at analyzing value trends in Pahoa, Hawaii County, and surrounding areas. Faced with data from an appraiser, the mortgage company will often drop the PMI with little trouble. At which time, the home owner can relish the savings from that point on.


Did you secure your mortgage with less than 20% down? Call REID E. CHOATE & ASSOCIATES, LLC today at 808-965-0238 to see if you can save money by removing your Private Mortgage Insurance payment.

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