Let WalshStreet Appraisals help you learn if you can cancel your PMI

It's widely understood that a 20% down payment is accepted when buying a house. The lender's only risk is usually just the remainder between the home value and the sum due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, selling the home again, and regular value variations on the chance that a borrower defaults.

During the recent mortgage upturn that our country recently experienced, it became common to see lenders only asking for down payments of 10, 5, 3 or even 0 percent. A lender is able to manage the added risk of the low down payment with Private Mortgage Insurance or PMI. This supplemental policy covers the lender in case a borrower defaults on the loan and the market price of the home is less than what is owed on the loan.

Since the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and frequently isn't even tax deductible, PMI can be pricey to a borrower. Separate from a piggyback loan where the lender takes in all the damages, PMI is favorable for the lender because they collect the money, and they receive payment if the borrower is unable to pay.


Did you secure your mortgage with less than 20% down? Call WalshStreet Appraisals today at 323-936-9970 to see if you can save money by removing your Private Mortgage Insurance payment.

How can a homeowner avoid paying PMI?

With the implementation of The Homeowners Protection Act of 1998, lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount on nearly all loans. Savvy homeowners can get off the hook sooner than expected. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.

Since it can take many years to get to the point where the principal is only 80% of the initial loan amount, it's important to know how your California home has increased in value. After all, any appreciation you've accomplished over time counts towards abolishing PMI. So what's the reason for paying it after the balance of your loan has fallen below the 80% threshold? Your neighborhood might not adhere to national trends and/or your home could have secured equity before things declined. So even when nationwide trends forecast decreasing home values, you should understand that real estate is local.

The difficult thing for almost all consumers to figure out is just when their home's equity goes over the 20% point. An accredited, California licensed real estate appraiser can certainly help. It is an appraiser's job to recognize the market dynamics of their area. At WalshStreet Appraisals, we know when property values have risen or declined. We're masters at analyzing value trends in Los Angeles, Los Angeles County, and surrounding areas. When faced with information from an appraiser, the mortgage company will often do away with the PMI with little trouble. At that time, the homeowner can retain the savings from that point on.


Is PMI a lineitem in your monthly house payment? Call WalshStreet Appraisals today at 323-936-9970 or send us an e-mail. Documentation of your home's current value 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