Have equity in your home? Want a lower payment? An appraisal from Herrin Appraisal Company can help you get rid of your PMI.

It's largely known that a 20% down payment is the standard when buying a house. The lender's risk is generally only the difference between the home value and the sum due on the loan, so the 20% adds a nice cushion against the costs of foreclosure, selling the home again, and regular value variations on the chance that a borrower doesn't pay.

Banks were accepting down payments down to 10, 5 and often 0 percent in the peak of last decade's mortgage boom. How does a lender endure the added risk of the small down payment? The answer is Private Mortgage Insurance or PMI. PMI protects the lender in the event a borrower doesn't pay on the loan and the worth of the house is lower than what the borrower still owes on the loan.

Since the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and frequently isn't even tax deductible, PMI is costly to a borrower. Opposite from a piggyback loan where the lender takes in all the deficits, PMI is lucrative for the lender because they obtain the money, and they receive payment if the borrower defaults.

How home owners can prevent bearing the cost of PMI

With the employment of The Homeowners Protection Act of 1998, on most loans lenders are obligated to automatically cease the PMI when the principal balance of the loan reaches 78 percent of the primary loan amount. The law designates that, upon request of the home owner, the PMI must be released when the principal amount reaches only 80 percent. So, smart homeowners can get off the hook a little early.

Since it can take many years to get to the point where the principal is only 20% of the initial amount borrowed, it's necessary to know how your home has increased in value. After all, every bit of appreciation you've achieved over time counts towards removing PMI. So why should you pay it after the balance of your loan has fallen below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home might have secured equity before things cooled off, so even when nationwide trends predict decreasing home values, you should realize that real estate is local.

An accredited, licensed real estate appraiser can help homeowners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. As appraisers, it's our job to understand the market dynamics of our area. At Herrin Appraisal Company, we know when property values have risen or declined. We're masters at identifying value trends in Clemmons, Forsyth County and surrounding areas. Faced with data from an appraiser, the mortgage company will generally do away with the PMI with little effort. At that 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