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Orangecrest Appraisal Service can help you remove your Private Mortgage Insurance

A 20% down payment is typically accepted when buying a house. Considering the risk for the lender is generally only the difference between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value changesin the event a borrower defaults.

During the recent mortgage upturn of the mid 2000s, it became customary to see lenders requiring down payments of 10, 5 or even 0 percent. How does a lender handle the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan covers the lender in case a borrower is unable to pay on the loan and the market price of the home is lower than what is owed on the loan.

PMI can be expensive to a borrower on the grounds that the $40-$50 a month per $100,000 borrowed is compiled into the mortgage payment and often isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they receive payment if the borrower defaults, different from a piggyback loan where the lender takes in all the costs.

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

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

The Homeowners Protection Act of 1998 makes the lenders on nearly all loans to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. Keen homeowners can get off the hook ahead of time. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.

Because it can take countless years to get to the point where the principal is just 20% of the original amount borrowed, it's essential to know how your home has appreciated in value. After all, every bit of appreciation you've achieved over the years counts towards removing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood might not be reflecting the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends indicate plummeting home values, you should understand that real estate is local.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a hard thing to know. As appraisers, it's our job to know the market dynamics of our area. At Orangecrest Appraisal Service, we're masters at analyzing value trends in Riverside, Riverside County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will often drop the PMI with little anxiety. At that time, the home owner can enjoy 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