Have equity in your home? Want a lower payment? An appraisal from REID E. CHOATE & ASSOCIATES, LLC can help you get rid of your PMI.

When getting a mortgage, a 20% down payment is typically the standard. The lender's only risk is often just the difference between the home value and the sum remaining on the loan, so the 20% adds a nice buffer against the charges of foreclosure, selling the home again, and typical value changes in the event a purchaser is unable to pay.

The market was accepting down payments as low as 10, 5 and frequently 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary policy protects the lender in the event a borrower defaults on the loan and the value of the property is lower than what the borrower still owes on the loan.

Because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and often isn't even tax deductible, PMI is pricey to a borrower. Instead of a piggyback loan where the lender consumes all the costs, PMI is lucrative for the lender because they obtain the money, and they are covered if the borrower doesn't pay.


Did you secure your mortgage with less than 20% down? Contact REID E. CHOATE & ASSOCIATES, LLC today at 808-965-0238. You may be able to save money by removing your Private Mortgage Insurance premium.

How can home owners prevent paying PMI?

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Savvy home owners can get off the hook sooner than expected. The law pledges that, upon request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.

It can take many years to reach the point where the principal is just 80% of the initial loan amount, so it's important to know how your Hawaii home has increased in value. After all, any appreciation you've achieved over time counts towards dismissing PMI. So why pay it after your loan balance has dropped below the 80% mark? Your neighborhood might not follow national trends and/or your home might have gained equity before things cooled off. So even when nationwide trends indicate declining home values, you should know most importantly that real estate is local.

The toughest thing for almost all people to determine is just when their home's equity rises above the 20% point. An accredited, Hawaii licensed real estate appraiser can definitely help. As appraisers, it's our job to know the market dynamics of our area. At REID E. CHOATE & ASSOCIATES, LLC, we know when property values have risen or declined. We're masters at identifying value trends in Pahoa, Hawaii County, and surrounding areas. When faced with data from an appraiser, the mortgage company will usually eliminate the PMI with little anxiety. At which time, the homeowner can relish the savings from that point on.


Is PMI a lineitem in your monthly mortgage payment? Call REID E. CHOATE & ASSOCIATES, LLC today at 808-965-0238 or send us an e-mail. Documentation of your home's present value could save you thousands.

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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