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Have equity in your home? Want a lower payment? An appraisal from The August Group Inc. can help you get rid of your PMI.

When purchasing a home, a 20% down payment is usually the standard. Since the liability for the lender is often only the difference between the home value and the sum outstanding on the loan, the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and typical value variationsin the event a purchaser is unable to pay.

Banks were accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. This supplemental plan protects the lender if a borrower doesn't pay on the loan and the worth of the home is lower than the loan balance.

Because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and many times isn't even tax deductible, PMI can be expensive to a borrower. Unlike a piggyback loan where the lender consumes all the costs, PMI is beneficial for the lender because they collect the money, and they get the money if the borrower defaults.

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

How can a home owner refrain from paying PMI?

With the employment of The Homeowners Protection Act of 1998, on most loans lenders are forced to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law promises that, upon request of the homeowner, the PMI must be released when the principal amount reaches only 80 percent. So, wise homeowners can get off the hook sooner than expected.

Since it can take countless years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's necessary to know how your home has increased in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Despite the fact that nationwide trends indicate plunging home values, realize that real estate is local. Your neighborhood may not be adopting the national trends and/or your home might have gained equity before things settled down.

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 tough thing to know. It is an appraiser's job to keep up with the market dynamics of their area. At The August Group Inc., we know when property values have risen or declined. We're experts at pinpointing value trends in St Louis, Saint Louis County and surrounding areas. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little effort. At that time, the homeowner can relish 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