Young & Associates Certified Appraisers, Inc.

Many homeowners in recent years have been forced to carry private mortgage insurance resulting in an additional charge in their monthly mortgage payment. Often times, homeowners are unaware that by having a recognized and approved certified appraiser performing an appraisal on their property they can eliminate this substantial additonal fee if their home has increased in value by a certain percentage. Check with your lenders.

Lenders are required to remove PMI (private mortgage insurance) on conventional loans when the secured property has 20% equity and the borrower requests for the removal. In many cases, lenders will allow cancellation of PMI when the loan to value ratio is less than 80% of the market value.

PMI is typically required when your down payment is less than 20% of the home's value. But, what if your home is now more valuable, and you've also added some equity through your payments themselves? You probably qualify to have the PMI dropped completely.

Private Mortgage Insurance commonly known as PMI, protects the lender against loan default. It does not protect the homeowner who pays for it and is a mandatory insurance policy added when the criteria is not met. PMI is normally required when your down payment is less than 20% at the time of purchase. PMI is offered instead of the down payment and allows purchasers to obtain a mortgage they otherwise may not be able to afford because of the 20% down payment. PMI also enables lenders to grant loans that would otherwise be considered too risky to be purchased by third party investors.

The Homeowners Protection Act of 1998 provides that homeowners can ask lenders to cancel PMI coverage as soon as 20 percent equity in your home has been reached. Lenders frequently, if asked, allow cancellation once the difference between market value and amount owed on mortgage is at least 20 percent. The lender would also be looking for a credit history, and an appraisal to verify market value.

To be eligible to drop your PMI you must have at least 20 percent equity in your home. To calculate your equity, divide mortgage amount owed by the estimated value of your home and multiply by 100. If the number is less than or equal to 80, you meet the eligibility requirements for the 20 percent equity, assuming the estimate of value is accurate. Example: Loan Amount = $75,000 Estimate of Value = $100,000 $75,000 divided by $100,000 = .75 multiplied by 100 = 75 75 is less than 80 so 20 percent equity requirement is met. VA and FHA loans for the most part are not eligible to drop PMI. One way to eliminate your mortgage insurance if you have an FHA or VA loan is to refinance to a conventional loan. We work with a number of investors and would be happy to recommend a lender to assist you.

To find out how much you pay in PMI check your monthly mortgage statement, it is included in your monthly mortgage payment. In order to get a rough estimate of the amount of your mortgage payment that goes toward PMI, use the following formula. Note it is less expensive for a fixed rate than an adjustable rate loan. 30 Year Fixed Rate Loan: Yearly PMI = (Loan Amount) multiplied by .0078 Monthly PMI = (Yearly PMI) divided by 12 Example Loan Amount - $100,000 Yearly PMI = $100,000 x .0078 = $780 per year Monthly PMI = $780 divided by 12 = $65 approximate monthly PMI.

We can help you to decide the correct course of action. At Young & Associates, we can consult with you over the phone, e-mail, or fax. We will ask you some basic questions and help you decide if it would be advisable to have an appraisal on your home performed.

If you decide you would like to begin the process to drop your PMI, click on the Appraisal button to the left to order your appraisal directly online or call us, (407) 834-1911. Once we receive your order, we will contact you to verify the order, ask some questions and set an appointment to inspect your property for the appraisal. It is helpful to fill out as much of the order form as possible.