Have equity in your home? Want a lower payment? An appraisal from Savery Appraisal Services, Inc. can help you get rid of your PMI.

When purchasing a home, a 20% down payment is typically the standard. The lender's risk is generally only the difference between the home value and the amount remaining on the loan, so the 20% provides a nice buffer against the charges of foreclosure, selling the home again, and natural value fluctuations on the chance that a purchaser defaults.

The market was taking down payments as low as 10, 5 and even 0 percent in the peak of last decade's mortgage boom. A lender is able to handle the added risk of the minimal down payment with Private Mortgage Insurance or PMI. PMI takes care of the lender in case a borrower defaults on the loan and the market price of the house is less than what the borrower still owes on the loan.

PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage payment and generally isn't even tax deductible. It's beneficial for the lender because they collect the money, and they get paid if the borrower defaults, contradictory to a piggyback loan where the lender takes in all the damages.

How can homeowners prevent bearing the expense of PMI?

The Homeowners Protection Act of 1998 forces the lenders on most loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law pledges that, at the request of the homeowner, the PMI must be abandoned when the principal amount equals just 80 percent. So, acute home owners can get off the hook sooner than expected.

It can take countless years to get to the point where the principal is only 20% of the initial loan amount, so it's necessary to know how your home has grown in value. After all, any appreciation you've acquired over the years counts towards dismissing PMI. So what's the reason for paying it after your loan balance has fallen below the 80% mark? Your neighborhood may not be following the national trends and/or your home could have gained equity before things calmed down, so even when nationwide trends hint at decreasing home values, you should realize that real estate is local.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It is an appraiser's job to recognize the market dynamics of their area. At Savery Appraisal Services, Inc., we know when property values have risen or declined. We're experts at analyzing value trends in Lindsay, Tulare County and surrounding areas. When faced with information from an appraiser, the mortgage company will usually do away with the PMI with little effort. At that time, the homeowner can delight in 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