PMI Removal Appraisals

Do you have PMI (private mortgage insurance)? If not sure, look at your monthly statement from your lender or loan servicer. If you see an entry on the statement that says “PMI” or Private Mortgage Insurance and you see a dollar amount next to the entry, then you have PMI insurance and you are paying a monthly premium for that insurance.

If you are not sure, then call your lender or loan servicer and ask them to check for you. If you do, have them send you the requirements needed to cancel the PMI insurance.

If you do have PMI insurance, you may recall that the insurance was required in order to qualify for the home loan. Typically, if your down payment was less than 20% of the purchase price, PMI insurance was required. It was required in order to protect the lender from loss in the event of foreclosure.

Usually when a home is sold through foreclosure, it is sold at about 80% of its market value. Hence, the 20% potential lender loss is mitigated by the borrower’s monthly premium payment for the mortgage insurance.

The good news is that if you purchased your property about a year ago, more or less, it is possible its value has risen to the point where the ratio between your mortgage balance and the home’s value is less than 80%.

If so, you may qualify for removal of the mortgage insurance and pocket the money that is being paid out for the insurance premium. Also remember that home improvements and principal reduction payments will also help you get closer to that magic 80% number.

So as your home’s value increases and your mortgage balance decreases, your LTV (loan to value ratio) decreases. Once your LTV reaches 80% or less, you may ask your lender to cancel your mortgage insurance. This is your right as a homeowner.

Recent legislation (Homeowners Protection Act) requires servicing lenders to make homeowners aware of any PMI they might be paying and provide the homeowner with the requirements necessary to have it cancelled.

There is a simple calculation you can make to determine if you qualify for PMI cancellation. Just first determine the current balance on your mortgage loan and then determine the value of your home. Once these numbers are available, simply divide the mortgage balance by the value of your home. If the division of those two numbers is 0.80 or less, you may qualify for the removal of your mortgage insurance.

Now the catch is this, the balance on your mortgage is a simple number to determine. However the value of your home is not. You may use an online service like Zillow to estimate the value of your home, however the lender will require you obtain an appraisal from a state licensed appraiser in order to establish your home’s value.

We are here to help you with the valuation of your home’s value. As state certified appraisers, we are able to provide the lender with the type of appraisal report required by your lender. So the next step after determining the balance of your mortgage and estimating the value of your home is to order the appraisal.

You may request the appraisal form any state licensed appraiser. Your lender may offer the name of an appraiser; however you may select the appraiser of your choice. Once the appraisal is obtained, simply follow the instructions given to you by your lender for the removal of private mortgage insurance.

Keep in mind, however, the lender will consider other factors in its decision to cancel the mortgage insurance, such as the borrower’s payment history over the life of the loan. This factor alone could alter the lender’s decision.

So while mortgage insurance was necessary in order to purchase your home, the day will come when it is no longer of any benefit and may in fact become an unnecessary liability. Therefore, it is important to stay on top of the numbers and it may be in your best interest to cancel the insurance after careful consideration of all issues. Bear in mind your lender will not initiate the cancelation for you.

We offer a free initial consultation that will help you determine if you have sufficient equity in your home to enable you to cancel your PMI. So call us today