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The August Group Inc. can help you remove your Private Mortgage Insurance

When buying a house, a 20% down payment is typically the standard. The lender's risk is usually only the remainder between the home value and the sum remaining on the loan, so the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and natural value fluctuations on the chance that a purchaser is unable to pay.

During the recent mortgage upturn of the last decade, it became common to see lenders requiring down payments of 10, 5 or often 0 percent. How does a lender manage the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This added plan guards the lender in the event a borrower is unable to pay on the loan and the value of the house is lower than what is owed on the loan.

Because the $40-$50 a month per $100,000 borrowed is bundled into the mortgage payment and many times isn't even tax deductible, PMI is costly to a borrower. Unlike a piggyback loan where the lender absorbs all the costs, PMI is lucrative for the lender because they secure the money, and they get paid if the borrower doesn't pay.

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

How home owners can keep from paying PMI

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically stop the PMI when the principal balance of the loan equals 78 percent of the original loan amount. Acute home owners can get off the hook ahead of time. The law states that, upon request of the homeowner, the PMI must be dropped when the principal amount equals just 80 percent.

Considering it can take many years to arrive at the point where the principal is only 20% of the initial amount of the loan, it's essential to know how your home has increased in value. After all, any appreciation you've acquired over the years counts towards abolishing PMI. So what's the reason for paying it after your loan balance has dropped below the 80% threshold? Your neighborhood might not be adopting the national trends and/or your home could have acquired equity before things simmered down, so even when nationwide trends predict decreasing home values, you should realize that real estate is local.

The toughest thing for many home owners to know is just when their home's equity rises above the 20% point. An accredited, licensed real estate appraiser can definitely help. As appraisers, it's our job to keep up with the market dynamics of our area. At The August Group Inc., we're masters at pinpointing value trends in St Louis, Saint Louis County and surrounding areas, and we know when property values have risen or declined. When faced with figures from an appraiser, the mortgage company will usually do away with the PMI with little anxiety. At that time, the homeowner can retain 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

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