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

It's typically inferred that a 20% down payment is the standard when getting a mortgage. The lender's only exposure is generally just the remainder between the home value and the amount due on the loan, so the 20% adds a nice buffer against the expenses of foreclosure, reselling the home, and natural value variations on the chance that a borrower defaults.

During the recent mortgage boom of the mid 2000s, it was common to see lenders reducing down payments to 10, 5 or sometimes 0 percent. How does a lender handle the added risk of the low down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender if a borrower is unable to pay on the loan and the market price of the home is lower than the loan balance.

Because the $40-$50 a month per $100,000 borrowed is compiled into the mortgage monthly payment and often isn't even tax deductible, PMI is costly to a borrower. As opposed to a piggyback loan where the lender absorbs all the losses, PMI is advantageous for the lender because they secure the money, and they get paid if the borrower is unable to pay.


Is PMI a part of your monthly house payment? Call WalshStreet Appraisals today at 323-936-9970 or send us an e-mail. A current appraisal could save you thousands.

How can a homeowner refrain from paying PMI?

The Homeowners Protection Act of 1998 requires the lenders on most loans to automatically cancel the PMI when the principal balance of the loan equals 78 percent of the initial 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, acute homeowners can get off the hook a little earlier.

Because it can take several years to arrive at the point where the principal is just 80% of the initial amount of the loan, it's crucial to know how your California home has appreciated in value. After all, every bit of appreciation you've achieved over time counts towards dismissing PMI. So why should you pay it after your loan balance has fallen below the 80% mark? Even when nationwide trends forecast falling home values, realize that real estate is local. Your neighborhood might not be minding the national trends and/or your home may have secured equity before things cooled off.

An accredited, California licensed real estate appraiser can help home owners figure out just when their home's equity rises above the 20% point, as it's a hard thing to know. Market dynamics and neighborhood-specific pricing trends are an appraiser's primary job! At WalshStreet Appraisals, we know when property values have risen or declined. We're masters at determining value trends in Los Angeles, Los Angeles County, and surrounding areas. When faced with figures from an appraiser, the mortgage company will most often cancel the PMI with little trouble. At that time, the homeowner can delight in the savings from that point on.


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