Oleson Real Estate Appraisers, Inc. can help you remove your Private Mortgage Insurance

When getting a mortgage, a 20% down payment is usually the standard. The lender's risk is usually only the remainder between the home value and the amount remaining on the loan, so the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and regular value changes on the chance that a purchaser defaults.

Banks were working with down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender handle the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This additional policy takes care of the lender in the event a borrower defaults on the loan and the value of the property is less 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 lumped into the mortgage payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender absorbs all the costs, PMI is favorable for the lender because they obtain the money, and they get paid if the borrower defaults.

How can a buyer prevent bearing the expense of PMI?

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

It can take many years to arrive at the point where the principal is only 20% of the initial amount borrowed, so it's necessary to know how your home has increased in value. After all, any appreciation you've obtained over time counts towards dismissing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Despite the fact that nationwide trends indicate plummeting home values, realize that real estate is local. Your neighborhood may not be minding the national trends and/or your home could have gained equity before things cooled off.

The toughest thing for many homeowners to know is just when their home's equity rises above the 20% point. A certified, licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At Oleson Real Estate Appraisers, Inc., we know when property values have risen or declined. We're masters at identifying value trends in Dundee, Yamhill County and surrounding areas. When faced with data from an appraiser, the mortgage company will usually remove 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