Let REID E. CHOATE & ASSOCIATES, LLC help you determine if you can cancel your PMI

A 20% down payment is usually accepted when buying a house. The lender's only exposure is usually just the difference between the home value and the amount outstanding on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and typical value fluctuations on the chance that a purchaser doesn't pay.

The market was taking down payments dropping to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the small down payment? The answer is Private Mortgage Insurance or PMI. This added policy protects the lender if a borrower is unable to pay on the loan and the market price of the property is lower than what is owed on the loan.

PMI can be pricey to a borrower in that the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and many times isn't even tax deductible. Different from a piggyback loan where the lender absorbs all the losses, PMI is money-making for the lender because they obtain the money, and they get paid if the borrower defaults.

The money you keep from dropping your PMI will make up for the price of the appraisal in a matter of months. Nobody is more qualified than REID E. CHOATE & ASSOCIATES, LLC when it comes to appreciating values in the city of Pahoa and Hawaii County. Contact us today.

How can home owners prevent paying PMI?

With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount on most loans. The law stipulates that, at the request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, wise home owners can get off the hook a little early.

It can take a significant number of years to get to the point where the principal is just 80% of the original amount borrowed, so it's crucial to know how your Hawaii home has increased in value. After all, every bit of appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Your neighborhood might not conform to national trends and/or your home might have secured equity before things declined. So even when nationwide trends predict declining home values, you should know most importantly that real estate is local.

The toughest thing for most people to figure out is whether their home equity has exceeded the 20% point. An accredited, Hawaii licensed real estate appraiser can certainly help. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At REID E. CHOATE & ASSOCIATES, LLC, we're masters at pinpointing value trends in Pahoa, Hawaii County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will most often drop the PMI with little trouble. At which time, the home owner can enjoy the savings from that point on.

The amount you keep from getting rid of your PMI will make up for the cost of the appraisal in no time. Nobody is more qualified than REID E. CHOATE & ASSOCIATES, LLC when it comes to appreciating values in Pahoa and Hawaii County. Contact us today.

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