Let Darrin M. Saver, CRA help you decide if you can eliminate your PMI

A 20% down payment is typically the standard when purchasing a home. Since the liability for the lender is usually only the difference between the home value and the amount due on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and regular value fluctuations in the event a borrower is unable to pay.

During the recent mortgage upturn that our country recently experienced, it became common to see lenders reducing down payments to 10, 5, 3 or sometimes 0 percent. A lender is able to endure the increased risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental plan protects the lender in the event a borrower doesn't pay on the loan and the market price of the house is lower than the loan balance.

Since the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI can be costly to a borrower. It's lucrative for the lender because they secure the money, and they are covered if the borrower doesn't pay, as opposed to a piggyback loan where the lender consumes all the losses.


	Did you have less than 20% to put down on your mortgage? Call Darrin M. Saver, CRA today at (215) 579-3356 to see if you can cancel your Private Mortgage Insurance payment.

How can a homebuyer prevent paying PMI?

With the implementation of The Homeowners Protection Act of 1998, lenders are forced to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the primary loan amount on nearly all loans. The law states that, at the request of the home owner, the PMI must be abandoned when the principal amount equals just 80 percent. So, wise home owners can get off the hook ahead of time.

Because it can take several years to get to the point where the principal is just 80% of the original amount borrowed, it's crucial to know how your Pennsylvania home has appreciated in value. After all, every bit of appreciation you've gained over time counts towards abolishing PMI. So why pay it after your loan balance has fallen below the 80% threshold? Your neighborhood might not conform to national trends and/or your home may have gained equity before the economy declined. So even when nationwide trends indicate a reduction in home values, you should realize that real estate is local.

A certified, Pennsylvania licensed real estate appraiser can help home owners figure out if their equity has exceeed the 20% point, as it's a hard thing to know. It is an appraiser's job to understand the market dynamics of their area. At Darrin M. Saver, CRA, we know when property values have risen or declined. We're masters at pinpointing value trends in Richboro, Bucks County, and surrounding areas. When faced with data from an appraiser, the mortgage company will usually remove the PMI with little effort. At that time, the homeowner can delight in the savings from that point on.


	Is PMI a part of your monthly house payment? Call Darrin M. Saver, CRA today at (215) 579-3356 or send us an e-mail. A new appraisal could save you thousands.

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