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

It's typically inferred that a 20% down payment is the standard when getting a mortgage. Since the liability for the lender is generally only the remainder between the home value and the sum remaining on the loan, the 20% provides a nice buffer against the costs of foreclosure, selling the home again, and typical value fluctuationsin the event a borrower is unable to pay.

The market was accepting down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added plan protects the lender in the event a borrower doesn't pay on the loan and the market price of the property is lower than the loan balance.

Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible, PMI is pricey to a borrower. Unlike a piggyback loan where the lender absorbs all the deficits, PMI is beneficial for the lender because they acquire the money, and they get the money if the borrower is unable to pay.

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

How can home owners avoid bearing the expense of PMI?

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law states that, at the request of the home owner, the PMI must be dropped when the principal amount reaches only 80 percent. So, smart home owners can get off the hook a little earlier.

Because it can take countless years to reach the point where the principal is just 20% of the initial amount borrowed, it's essential to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Even when nationwide trends predict declining home values, realize that real estate is local. Your neighborhood may not be following the national trends and/or your home may have gained equity before things calmed down.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity goes over the 20% point, as it's a tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At REID E. CHOATE & ASSOCIATES, LLC, we're experts at analyzing value trends in Pahoa, Hawaii County and surrounding areas, and we know when property values have risen or declined. When faced with data from an appraiser, the mortgage company will often eliminate the PMI with little trouble. At that time, the homeowner can delight in 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