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. Since the risk for the lender is generally only the difference between the home value and the amount remaining on the loan, the 20% supplies a nice cushion against the charges of foreclosure, selling the home again, and regular value fluctuationson the chance that a borrower defaults.

Banks were accepting down payments as low as 10, 5 and even 0 percent during the mortgage boom of the mid 2000s. How does a lender endure the additional risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI covers the lender in case a borrower is unable to pay on the loan and the value of the house is less than what the borrower still owes on the loan.

PMI can be pricey to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage payment and frequently isn't even tax deductible. Unlike a piggyback loan where the lender consumes all the deficits, PMI is advantageous for the lender because they secure the money, and they get the money if the borrower is unable to pay.

How can a homeowner keep from bearing the cost of PMI?

With the implementation of The Homeowners Protection Act of 1998, on nearly all loans lenders are required to automatically terminate the PMI when the principal balance of the loan equals 78 percent of the beginning loan amount. Smart home owners can get off the hook ahead of time. The law stipulates that, at the request of the home owner, the PMI must be dropped when the principal amount reaches just 80 percent.

It can take many years to get to the point where the principal is just 20% of the original amount of the loan, so it's essential to know how your home has appreciated in value. After all, any appreciation you've accomplished over time counts towards removing PMI. So why should you pay it after the balance of your loan has dropped below the 80% threshold? Your neighborhood may not be minding the national trends and/or your home may have gained equity before things calmed down, so even when nationwide trends hint at falling 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 goes over the 20% point, as it's a hard thing to know. It is an appraiser's job to understand the market dynamics of their area. At Savery Appraisal Services, Inc., we're experts at identifying value trends in Lindsay, Tulare 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 most often cancel the PMI with little trouble. At which time, the homeowner can relish 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