Kordik & Associates, Inc. can help you remove your Private Mortgage Insurance

It's widely understood that a 20% down payment is accepted when purchasing a home. The lender's risk is oftentimes only the difference between the home value and the amount remaining on the loan, so the 20% adds a nice buffer against the costs of foreclosure, reselling the home, and natural value changes on the chance that a borrower defaults.

During the recent mortgage boom of the mid 2000s, it became widespread to see lenders requiring down payments of 10, 5 or often 0 percent. A lender is able to handle the increased risk of the reduced down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the worth of the home is lower than what is owed on the loan.

PMI is costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. It's lucrative for the lender because they acquire the money, and they get paid if the borrower doesn't pay, contradictory to a piggyback loan where the lender consumes all the damages.

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

How homeowners can avoid bearing the cost of PMI

The Homeowners Protection Act of 1998 makes the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the initial loan amount. The law stipulates that, at the request of the homeowner, the PMI must be abandoned when the principal amount reaches just 80 percent. So, acute home owners can get off the hook ahead of time.

Since it can take countless years to reach the point where the principal is only 20% of the initial amount of the loan, it's crucial to know how your home has grown in value. After all, every bit of appreciation you've obtained over the years counts towards removing PMI. So why should you pay it after your loan balance has dropped below the 80% threshold? Your neighborhood may not be adhering to the national trends and/or your home might have secured equity before things simmered down, so even when nationwide trends indicate falling home values, you should realize that real estate is local.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to know the market dynamics of our area. At Kordik & Associates, Inc., we're experts at pinpointing value trends in Elmhurst, Dupage County and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will usually drop the PMI with little anxiety. At that time, the home owner 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