WalshStreet Appraisals can help you remove your Private Mortgage Insurance

It's widely understood that a 20% down payment is the standard when purchasing a home. Because the risk for the lender is generally only the difference between the home value and the sum due on the loan, the 20% supplies a nice buffer against the costs of foreclosure, reselling the home, and typical value fluctuations in the event a purchaser is unable to pay.

During the recent mortgage boom of the mid 2000s, it was customary to see lenders reducing down payments to 10, 5 or often 0 percent. How does a lender handle the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI takes care of the lender if a borrower defaults on the loan and the market price of the house is less than what is owed on the loan.

Since the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and on many occasions isn't even tax deductible, PMI can be costly to a borrower. It's money-making for the lender because they obtain the money, and they receive payment if the borrower defaults, separate from a piggyback loan where the lender absorbs all the deficits.


Does your monthly house payment include a fee PMI? Call WalshStreet Appraisals today at 323-936-9970 or send us an e-mail. A new appraisal could save you thousands.

How can home buyers prevent bearing the expense of PMI?

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically terminate the PMI when the principal balance of the loan reaches 78 percent of the original loan amount. The law guarantees that, upon request of the home owner, the PMI must be dropped when the principal amount equals only 80 percent. So, keen home owners can get off the hook sooner than expected.

It can take a significant number of years to arrive at the point where the principal is just 80% of the initial loan amount, so it's necessary to know how your California home has grown in value. After all, every bit of appreciation you've acquired over the years counts towards removing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not follow national trends and/or your home might have secured equity before the economy declined. So even when nationwide trends predict decreasing home values, you should know most importantly that real estate is local.

The difficult thing for many consumers to determine is just when their home's equity rises above the 20% point. A certified, California licensed real estate appraiser can surely help. It is an appraiser's job to understand the market dynamics of their area. At WalshStreet Appraisals, we're masters at analyzing value trends in Los Angeles, Los Angeles County, and surrounding areas, and we know when property values have risen or declined. Faced with figures from an appraiser, the mortgage company will generally remove the PMI with little anxiety. At which time, the homeowner can enjoy the savings from that point on.


Is PMI something increasing your monthly house payment? Call WalshStreet Appraisals today at 323-936-9970 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