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

A 20% down payment is usually the standard when getting a mortgage. The lender's liability is generally only the remainder between the home value and the sum remaining on the loan, so the 20% provides a nice buffer against the expenses of foreclosure, reselling the home, and regular value fluctuations in the event a purchaser is unable to pay.

During the recent mortgage upturn of the last decade, it became widespread to see lenders commanding down payments of 10, 5 or even 0 percent. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. PMI guards the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower than what is owed on the loan.

Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be pricey to a borrower. Contradictory to a piggyback loan where the lender consumes all the damages, PMI is money-making for the lender because they obtain the money, and they receive payment if the borrower defaults.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How can home owners keep from bearing the cost of PMI?

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are forced to automatically cease the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. The law stipulates that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent. So, acute homeowners can get off the hook a little earlier.

It can take countless years to reach the point where the principal is just 20% of the initial amount of the loan, so it's important to know how your home has grown in value. After all, all of the appreciation you've obtained over the years counts towards abolishing PMI. So why should you pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not be adopting the national trends and/or your home may have secured equity before things settled down, so even when nationwide trends forecast plunging home values, you should understand that real estate is local.

The difficult thing for many home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can surely help. As appraisers, it's our job to understand the market dynamics of our area. At REID E. CHOATE & ASSOCIATES, LLC, we're experts at determining value trends in Pahoa, Hawaii County and surrounding areas, and we know when property values have risen or declined. Faced with information from an appraiser, the mortgage company will usually cancel the PMI with little effort. At that time, the home owner can retain the savings from that point on.

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