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

When purchasing a home, a 20% down payment is typically the standard. The lender's liability is usually only the remainder between the home value and the amount due on the loan, so the 20% adds a nice cushion against the expenses of foreclosure, selling the home again, and typical value changes on the chance that a borrower doesn't pay.

Banks were working with down payments discounted to 10, 5 and even 0 percent during the mortgage boom of the last decade. A lender is able to handle the increased risk of the minimal down payment with Private Mortgage Insurance or PMI. This added policy protects the lender in case 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.

Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI can be costly to a borrower. Instead of a piggyback loan where the lender absorbs all the damages, PMI is lucrative for the lender because they secure the money, and they receive payment if the borrower is unable to pay.

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

How can home owners refrain from bearing the expense of PMI?

The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. Keen home owners can get off the hook a little early. The law pledges that, at the request of the home owner, the PMI must be released when the principal amount equals just 80 percent.

Because it can take several years to get to the point where the principal is just 80% of the original amount borrowed, it's necessary to know how your Hawaii home has increased in value. After all, all of the appreciation you've acquired over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Even when nationwide trends predict falling home values, understand that real estate is local. Your neighborhood may not be following the national trends and/or your home may have acquired equity before things simmered down.

The toughest thing for almost all people to determine is whether their home equity has exceeded the 20% point. An accredited, Hawaii licensed real estate appraiser can definitely help. It is an appraiser's job to keep up with the market dynamics of their area. At REID E. CHOATE & ASSOCIATES, LLC, we know when property values have risen or declined. We're masters at determining value trends in Pahoa, Hawaii County, and surrounding areas. Faced with data from an appraiser, the mortgage company will usually remove the PMI with little trouble. At which time, the homeowner can relish the savings from that point on.

The savings from getting rid of your PMI will make up for the price of the appraisal in no time. REID E. CHOATE & ASSOCIATES, LLC is in the business of tracking real estate value trends 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