Have equity in your home? Want a lower payment? An appraisal from Hometown Appraiser, LLC can help you get rid of your PMI.

When buying a house, a 20% down payment is typically the standard. Considering the risk for the lender is oftentimes only the remainder between the home value and the sum remaining on the loan, the 20% adds a nice cushion against the expenses of foreclosure, reselling the home, and natural value changeson the chance that a borrower defaults.

Banks were taking down payments down to 10, 5 and even 0 percent in the peak of last decade's mortgage boom. How does a lender manage the increased risk of the low down payment? The solution is Private Mortgage Insurance or PMI. PMI takes care of the lender in the event a borrower is unable to pay on the loan and the worth of the property is lower than the balance of the loan.

PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is lumped into the mortgage monthly payment and many times isn't even tax deductible. Separate from a piggyback loan where the lender consumes all the deficits, PMI is advantageous for the lender because they collect the money, and they get paid if the borrower is unable to pay.

How can home owners keep from paying PMI?

With the utilization of The Homeowners Protection Act of 1998, on most loans lenders are required to automatically eliminate the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart home owners can get off the hook a little early. The law promises that, at the request of the homeowner, the PMI must be dropped when the principal amount reaches just 80 percent.

It can take many years to reach the point where the principal is just 20% of the initial amount borrowed, so it's essential to know how your home has grown in value. After all, any appreciation you've acquired over time counts towards removing PMI. So why pay it after the balance of your loan has fallen below the 80% mark? Despite the fact that nationwide trends predict plummeting home values, realize that real estate is local. Your neighborhood might not be following the national trends and/or your home could have secured equity before things cooled off.

A certified, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a tough thing to know. As appraisers, it's our job to know the market dynamics of our area. At Hometown Appraiser, LLC, we know when property values have risen or declined. We're masters at determining value trends in Ocean Isle Beach, Brunswick County and surrounding areas. When faced with figures from an appraiser, the mortgage company will generally drop the PMI with little anxiety. At that time, the home owner can enjoy 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