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

When getting a mortgage, a 20% down payment is typically the standard. Considering the liability for the lender is oftentimes only the remainder between the home value and the amount due on the loan, the 20% provides a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuations on the chance that a purchaser defaults.

During the recent mortgage upturn of the last decade, it was common to see lenders making deals with down payments of 10, 5, 3 or sometimes 0 percent. How does a lender handle the additional risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower defaults on the loan and the market price of the property is lower than the loan balance.

PMI is costly to a borrower in that the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and on many occasions isn't even tax deductible. It's money-making for the lender because they collect the money, and they get paid if the borrower doesn't pay, in contrast to a piggyback loan where the lender consumes all the losses.


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 save money by removing your Private Mortgage Insurance payment.

How homebuyers can refrain from paying PMI

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law guarantees that, at the request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, savvy home owners can get off the hook ahead of time.

It can take many years to arrive at the point where the principal is just 80% of the initial loan amount, so it's crucial to know how your Hawaii home has increased in value. After all, all of the appreciation you've gained over time counts towards dismissing PMI. So why should you pay it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends forecast decreasing home values, be aware that real estate is local. Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things cooled off.

The hardest thing for almost all homeowners to determine is just when their home's equity rises above the 20% point. An accredited, Hawaii licensed real estate appraiser can definitely help. It is an appraiser's job to know the market dynamics of their 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 figures from an appraiser, the mortgage company will usually eliminate the PMI with little trouble. At which time, the home owner can relish the savings from that point on.


The savings from dropping your PMI pays for the appraisal in no time. REID E. CHOATE & ASSOCIATES, LLC stays current with 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

 


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