profile picture

English Spanish

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

A 20% down payment is usually the standard when purchasing a home. Because the risk for the lender is usually only the difference between the home value and the sum due on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and regular value changes on the chance that a purchaser defaults.

Banks were working with down payments as low as 10, 5 and frequently 0 percent in the peak of last decade's mortgage boom. How does a lender endure the increased risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This added plan guards the lender if a borrower defaults on the loan and the market price of the home is less than the loan balance.

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


The savings from dropping your PMI pays for the appraisal in a matter of months. REID E. CHOATE & ASSOCIATES, LLC has years of experience with value trends in the city of Pahoa and Hawaii County. Contact us today.

How can a home buyer keep from bearing the cost of 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 equals 78 percent of the beginning loan amount on nearly all loans. The law guarantees that, at the request of the home owner, the PMI must be released when the principal amount equals only 80 percent. So, acute homeowners can get off the hook ahead of time.

It can take many years to reach the point where the principal is only 80% of the original loan amount, so it's essential to know how your Hawaii home has grown in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood might not follow national trends and/or your home may have secured equity before the economy cooled off. So even when nationwide trends hint at falling home values, you should know most importantly that real estate is local.

The hardest thing for many homeowners to figure out is whether their home equity has exceeded the 20% point. An accredited, Hawaii licensed real estate appraiser can surely help. It's an appraiser's job to recognize 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 generally eliminate the PMI with little trouble. At which time, the homeowner can relish the savings from that point on.


The savings from getting rid of the PMI required when you got your mortgage pays for the appraisal in a matter of months. 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